The owner of a 120-room hotel next to DuPage Airport in the western suburbs has been hit with a foreclosure lawsuit after allegedly defaulting on a $8.6 million loan, federal court records show.
Adding to the distress the COVID-19 crisis has caused in the local hospitality sector, a venture of Miramar Beach, Fla.-based Banyan Investment Group owes more than $13 million in principal, interest and late fees on its mortgage for the Hilton Garden Inn at 4070 E. Main St. in St. Charles, according to a complaint filed last week.
It's one of what's expected to be a slew of foreclosure suits against hotel owners after months of historically weak demand during the coronavirus pandemic. And while much of the pain has been felt by larger, full-service hotels in urban areas that rely on group business and other ancillary revenue, Banyan's suburban hotel troubles show that some limited-service properties are also hurting.
Banyan financed its $10.2 million Hilton Garden Inn acquisition in 2016 with the $8.6 million loan, which was packaged with other mortgages and sold off to bondholders. Banyan pulled in more than $1 million in net operating income at the property off $4 million in top-line revenue in 2019, according to Bloomberg loan data tied to the mortgage.
Travel all but evaporated in the wake of COVID-induced economic shutdowns, even for limited-service hotels that are faring better than larger ones that count on groups and conventions. Occupancy at limited-service hotels nationwide that were open at the end of June was down 29.3 percent year over year, compared with a 41 percent drop among full-service hotels, according to hotel research firm STR.
Banyan stopped making its monthly payments on the loan in April, Bloomberg data shows. That ultimately led to lender Deutsche Bank, which represents investors in the commercial mortgage-backed securities loan, filing the foreclosure suit this month.
A spokesman for Banyan Investment Group couldn't be reached for comment.
Hotels owners with such CMBS loans tend to have less flexibility in reworking terms of their deals than those with single lenders, because the loans are part of a pool of mortgages. And a wave of bad hotel loans could be coming: The delinquency rate among hotels with CMBS loans jumped to a record-high 33.5 percent in May from 2.5 percent in April, according to New York-based research firm Trepp.
With little visibility into when demand for hotel stays will come back, some owners are now under water, or worth less than they owe in debt.
In one extreme example, the New York-based owner of the Palmer House Hilton faces foreclosure after it stopped making payments on its $427 million of CMBS debt. The hotel, which was appraised at $560 million when owner Thor Equities refinanced the property in 2018, was appraised again last month at just $305 million.
In another case of a fallen valuation: The 610-room JW Marriott Chicago, which is also tied to a CMBS loan, was appraised last month at $210 million, down from $370 million when it was appraised in 2017, according to Bloomberg data.
Other hotels downtown that have been flagged for potential default in recent weeks include the Hotel Felix, Godfrey Hotel, the Hilton Suites Chicago Magnificent Mile and the Whitehall Hotel.
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September 17, 2020 at 10:22PM
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West suburban hotel owner hit with foreclosure suit - Crain's Chicago Business
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