Owners of the Chicago South Loop Hotel have filed for Chapter 11 bankruptcy protection as their property faces foreclosure, much to the dismay of its loan servicer.
Rialto Capital Advisors initiated foreclosure proceedings in Illinois federal court in September, alleging nonpayment on a $6.8 million commercial mortgage-backed securities loan initially issued in 2013 that is set to mature in 2028. Attorneys for the 231-room hotel’s owners, Louis Dodd and Vickie White, filed a bankruptcy petition on Feb. 27, court records show.
Attorneys for Rialto responded March 8 by asking the court to dismiss the bankruptcy petition, calling it improper and in bad faith. Rialto’s filing claims Dodd and White made the bankruptcy filing just hours after both parties in the foreclosure case had agreed upon a receiver for the property following almost three months of negotiations and thus prevented the order appointing the receiver from being entered in court, according to public records.
Additionally, the motion to dismiss claims that the bankruptcy filing was made without proper corporate authorization and that Dodd and White have no ability to confirm a reorganization plan for Chapter 11 bankruptcy. Rialto did not respond to a request for comment. An attorney for the servicer declined to comment.
The hotel, located at 11 West 26th Street, pairs affordable prices with proximity to the Loop. Its troubles are emblematic of the struggles even well-located Chicago-area hotels have faced amid the pandemic, as floundering occupancy rates have left hotel owners falling short on even relatively small loans.
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. Attorneys for Dodd and White did not respond to a request for comment.
The South Loop hotel is far from the only one falling on tough times. The Hilton Chicago Magnificent Mile Suites’ Gold Coast location wasn’t enough to draw a bidder when LNR Partners tried to auction off the property in February, and an auction leading to the $29 million sale of the Hotel Felix in River North resulted in a shortfall on a 2013 loan against the property in October.
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