Blackstone picks up debt-burdened Sofitel Chicago Water Tower

14 Nov, 2012 By: Stephanie Ricca

The Sofitel Chicago Water Tower is the second debt-burdened hotel in the Windy City to find relief through reorganization in recent weeks.

Blackstone Group cut an agreement with the Sofitel's previous owners, GEM Realty Capital, Goldman Sachs Group's Whitehall real estate funds and Accor SA, to acquire the property's delinquent mortgage at a discount, then worked with the previous owners on a voluntary forfeiture instead of a foreclosure, according to The Wall Street Journal.

The previous owners purchased the property in 2006 for $105 million and put $160 million in mortgages on it. Then this year, Sofitel picked up $85 million of the Sofitel's debt at a discount. In July, the hotel's first mortage came due and the owners couldn't refinance.

The article cites Blackstone's recent history of buying distressed debt to later acquire the properties associated with the loans. In 2010 the development giant acquired a 14-hotel portfolio from Columbia Sussex Corp. in much the same way.

Another debt-burdened Chicago property, the Allerton Hotel, saw resolution at the end of October when a long-standing ownership dispute was settled under a reorganization plan endorsed by a bankruptcy judge.

In this case, hedge fund Petra Capital Management retained ownership of the 443-room hotel as part of a settlement agreement with hotel investor DiamondRock Hospitality, according to Crain's Chicago Business. DiamondRock had filed to foreclose on the property after buying $69 million in senior debt on the property. Petra, whose affiliate held a $10-million mezzanine loan on the hotel, blocked the forclosure suit by filing for Chapter 11 in May 2011.

The battling companies finally reached an agreement under which Petra will pay $5 million of the $71 million it owes DiamondRock.


Topic : Chicago, Foreclosure
External Source : The Wall Street Journal, Crain's Chicago Business

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