River North’s Hotel Felix loan at auction

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The listing will provide another test of investor appetite for struggling downtown hotels as hotel sector demand recovers from the public health crisis. The strength of leisure travel and the return of large group events to hotels in recent months have pushed occupancy and room rates to their highest levels since late 2019, signs that could prompt hotel investors to bet on the recovery.

City center hotel occupancy averaged 78% last month, down from 59% in July 2021 and just below the July 2019 average of 82%, according to hotel data and analytics firm STR .

Still, business travel, which accounts for a larger share of hotel demand in Chicago than in most cities, has been slower to return and has hampered the downtown hotel market’s recovery. This weighed on property values ​​and triggered a wave of distress in the market.

Hotel Felix was one of many downtown hotels to be congested by the pandemic. The property was appraised at $23.5 million in July 2020, a fraction of the $68.6 million appraised value when the property’s owner, a joint venture of Oxford Hotels & Resorts and Gettys Group, Chicago-based, took out the loan in 2013. This refinancing allowed the joint venture to cash out part of its stake in the property, which it purchased in 2007 for $24 million.

The Felix was most recently valued at $24.1 million in December, according to Bloomberg data related to the loan. The mortgage was bundled with other loans and sold to commercial investors in mortgage-backed securities, making much of the property’s financial data publicly available.

Miami Beach, Fla.-based special service LNR Partners is overseeing the loan on behalf of CMBS bondholders. An NRL spokesman declined to comment on the offer.

Paramount is marketing the loan as an opportunity for a buyer to complete the foreclosure process and gain control of the hotel. The brokerage said in marketing materials that the owner “remains cooperative with (the) lender in view of title transition” and that buyers may pursue “another brand or potential alternative use” with the 12-storey building. floors.

Oxford chairman and chief executive John Rutledge said in a statement that the ownership group had already generated “attractive returns” from its 2013 refinancing and that the company could not agree with his lender on a plan to continue owning the property.

“Despite several years of trying to create solutions to overcome (pandemic-related) challenges at this hotel, such as identifying a social services agency to occupy the hotel as we have done in many other hotels, the lender has not accepted any of our proposals,” the statement said. “As such, we and our partners, reluctantly but willingly, have agreed to an amicable resolution with the lender.”

The starting bid for the auction, which is operated by commercial real estate auction platform Ten-X, is listed at $7.5 million, according to marketing materials.

The Felix Hotel auction comes as other prominent downtown hotels go through the foreclosure process.

Late last month, a Cook County judge issued a foreclosure judgment against the owner of the Palmer House Hilton Chicago, the city’s second-largest hotel, for defaulting on its $333.2 million CMBS loan. of dollars. This puts a trustee representing the investors in the mortgage in a position to take control of the property through an auction.

Separately, a trustee on behalf of investors in a $203.5 million CMBS loan tied to the JW Marriott Chicago hotel in the Loop submitted the only bid at an auction last month to take the property control.

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