Distressed Bolingbrook Aloft hotel sold out of foreclosure for $17M

Hoteliers Parag and Kevin Patel found an investment property to pounce on with a distressed suburban Chicago asset.

An LLC managed by the Patels, who are based in Northbrook and Wisconsin, bought the Aloft-branded hotel in Bolingbrook out of a $26 million foreclosure lawsuit last month, public records show.

The 155-room asset at 500 Janes Avenue fetched $17.3 million in the deal, according to Matthew Tarshis of Frontline Real Estate Partners, who posted on social media about the transaction. Frontline was the brokerage that marketed the property for sale as well as its court-appointed receiver while its lender’s foreclosure complaint moved through court.

Tarshis and Paramount did not return requests for comment.

The Patels’ LLC also includes Sanjeev Misra, the head of Chicago-based hotel brokerage Paramount Lodging Advisors and the property management firm currently handling the asset.

They agreed to assume its existing debt stemming from a $14.2 million mortgage that the previous owner, Virginia Beach-based LTD Hospitality Group, took out right before the pandemic bludgeoned hoteliers nationwide, and forced the landlord to stop paying its loan on time. A lot of additional interest accrued on the loan as the borrower’s delinquency lingered. The debt was packaged with other commercial real estate loans and sold off to investors in mortgage-backed securities, making details of the property’s performance public.

LTD developed the property, which opened in 2009. The firm stopped making loan payments in April 2020, when the hotel’s revenue stream, deprived by the pandemic, wasn’t enough to cover its debt service and operational costs. The foreclosure suit was filed in 2021.

Revenue has started to come back, with the property’s net cash flow reaching $900,000 last year on 63 percent occupancy, up from when it lost $300,000 in 2020 on only 29 percent occupancy, according to credit ratings agency Morningstar. Last year’s improvement brought the property back up to being able to cover its debt and other costs, though just barely.

With the Aloft brand geared more toward leisure travelers than business trekkers, it’s in a better position to recover from the health crisis than some suburban hotels that are more reliant on a resurgence of nearby office attendance. Earlier this month, separate ventures of Goldman Sachs and Phoenix Development took painful financial losses with sales of two Deerfield hotels they own nearby sparsely attended corporate campuses.

With the Aloft buyer’s mortgage assumption, the new landlord likely got a lower rate than it could have notched by taking out new debt. The buyer was able to negotiate a slight reduction in the loan’s interest rate of 0.24 percentage points, but had to sign a recourse guaranty of $1 million, meaning the lender could come after the borrower’s other assets in certain circumstances if the loan becomes delinquent again, according to Morningstar.

Payments owed by the new borrower of a $1.6 million portion of interest accrued between December 2020 and July were deferred to the loan’s 2030 maturity date, Morningstar loan data said.

The hotel was appraised at $15 million last month, down from $21 million when the loan was issued, Morningstar said.

Editor’s note: This story has been corrected to note Parag and Kevin Patel are the new landlords and that Sanjeev Misra is head of the property management firm operating the asset.

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