As hotel owners across Chicago face approaching deadlines to pay off pandemic-induced loans, one is unlikely to escape foreclosure.
The 231-room South Loop hotel at 11 West 26th Street was hit with a complaint filed Sept. 30 in Illinois federal court alleging nonpayment on a $6.8 million commercial mortgage-backed securities loan initially issued in 2013. It’s set to mature in 2028, public records show.
The owners, Louis Dodd and Vickie White, have yet to respond to the filing. Dodd has been a part-owner in multiple Chicago hotels, including the Amber Inn on the South Side at Pershing Road and South Michigan Avenue. He declined to comment. Attempts to reach White were also unsuccessful.
That legal action was taken regarding the debt shows how lodging assets have struggled to support even relatively small loans in the wake of the pandemic.
The borrower, an LLC controlled by White and Dodd, now owes a little more than $7 million, which includes $1.5 million in late payment fees.
Before the pandemic, the limited-service hotel was bringing in more than enough revenue to fulfill the loan’s payment schedule. At the end of 2019, South Loop Hotel generated five times the cash it needed to cover its debts on the loan, according to the ratings agency DBRS Morningstar.
But by September 2020, its revenue was wiped out entirely, and it was losing more money than it was taking in, Morningstar reported. Payments on the loan had been delinquent multiple times in the year before the debt was watchlisted in March 2021. Shortly thereafter, the loan was handed off to special servicer Rialto Capital Advisors in an attempt to bring it into compliance.
Rialto initiated the foreclosure proceedings on behalf of the CMBS investors. Attorneys representing Rialto didn’t return requests for comment.
Since the loan was issued, the hotel’s value has slid more than 20 percent, to $24.9 million as of August from a $31.3 million valuation in 2013, according to the Morningstar report.
South Loop Hotel is far from the only lodging asset to have faced distress in Chicago this year. In July, the JW Marriott in the Loop was auctioned back to a trustee for CMBS investors on a separate, $204 million loan on which Orlanda-based Estein USA defaulted. And River North’s Hotel Felix was sent to the auction block after its owners failed to make payments on a $44 million mortgage.
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