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Hilton Chicago Magnificent Mile hitting auction block

Procaccianti Companies defaulted on $77.2 million loan

Starwood’s Adam Behlman; Hilton Chicago at 198 East Delaware Place (Google Maps, Linkedin, Getty)
Starwood’s Adam Behlman; Hilton Chicago at 198 East Delaware Place (Google Maps, Linkedin, Getty)

A Gold Coast hotel is headed to the auction block a little more than a year after the owner turned the property over to its lender.

Rhode-Island based real estate investment firm Procaccianti Companies transferred ownership of the 345-key Hilton Chicago Magnificent Mile Suites at 198 East Delaware Place to LNR Partners, special servicer on a $77.2 million loan on the property, in September 2021.

Now, the property will be available in a sheriff’s foreclosure auction scheduled for Jan. 19. An opening bid has not been set. LNR, whose parent company is Starwood, did not return a request for comment.

It’s a buyer’s market for distressed Chicago hotels, as a number of downtown and suburban properties have been hit with foreclosure suits or headed to the auction block in recent months. Players including Monarch Alternative Capital and Frontier Development and Hospitality have snatched up troubled assets.

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Chicago hotel broker Scott Kaniewski of HREC Investment Advisors, who is not involved in the Hilton Mag Mile foreclosure, said the full-service hotel is a well-branded asset that will attract a range of potential buyers including high net worth individuals, groups of syndicated partners or private equity firms.

It’s also possible that LNR could place a credit bid on the property depending on how the asset’s value compares to the value of the loan and if LNR anticipates the hotel to recover value in the next two years, Kaniewski said.

The hotel’s appraised value has declined since the loan was issued. It was appraised at $68.1 million in April, down from $112.4 million, according to ratings agency DBRS Morningstar. Procaccianti stopped making loan payments shortly after the start of the pandemic in March 2020, which was less than seven months before the loan was due to mature.

Its situation is not unique in the city due to occupancy rates. Chicago-area hotel occupancies rose to 60 percent in the first half of 2022, up from less than 50 percent during the early months of the pandemic in 2020. But that’s still down from 2018 and 2019, when the rate hovered around 70 percent, according to the most recent data available from Marcus & Millichap. So even as the hotel market is on a slow road to recovery, it’s not moving fast enough, which leaves the future of some hotels in the hands of the highest bidder.

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Chicago HotelsCovidDowntownGold Coast