Wednesday, October 17, 2007

Hotel 71 saga continues

I wrote previously about Hotel 71, the East Wacker Drive property that has been struggling as of late. Well, we're not done yet. Crain's reports today that the Hotel 71 UCC auction of the mezzanine loan took place as scheduled on October 3, and that Oaktree Capital Management now controls the hotel. (Apparently two other bidders showed up but OCM, the mezz lender, prevailed.)

So, according to the story it looks like OCM will try to take advantage of hotel values and put the property on the market. But (1) there's construction to be done (I checked out the Recorder of Deeds website to look at people who have and may not have been paid), (2) as we all know borrowing costs are higher, and (3) Wells Fargo, as the trustee for the participating lenders, has foreclosed on a $101 million senior loan that was due back in April. The article even hints of a Chapter 11 filing that would stall the foreclosure, deal with bills help clear the way to a sale. My bet is still on the OCM team to do all right.

The good news? Lenders and borrowers are getting the hang of current conditions. And hotel sale prices are still doing well, as are room rates in downtown Chicago. Perhaps it is a combination of a medical convention and the USC-Notre Dame weekend, but when I tried to book a hotel room for tomorrow and Thursday nights not much was available, and the rates were, by usual Chicago standards, sky-high.

In any event, if you are dying to do a hotel deal in Chicago, it looks like now's your chance. Sophisticated dirt players (and their lawyers!) need only apply.