A $25 million foreclosure dispute over a hotel steps from the Magnificent Mile has popped up due to the struggles of a hospitality startup in danger of having its stock delisted from the Nasdaq exchange, according to a lawsuit and the property owner.
Real estate investment firm Hotel Capital defaulted on a nearly $20 million mortgage secured by the hotel at 100 East Chestnut Street once known as the Tremont, a property now being run by Selina, a hospitality brand that has had its valuation clobbered since going public last year, according to a Cook County court complaint filed this week and the landlord.
Hotel Capital now owes $25 million, after interest and fees, to the lender that owns the note, which is an entity controlled by JLL’s investment arm, LaSalle Investment Management, the complaint said.
Hotel Capital CEO Michael Collier said the foreclosure filing is the result of Selina failing to meet its obligations to the lender and to his firm. Selina was also supposed to reopen the property’s restaurant space that formerly housed a Mike Ditka’s restaurant, which announced plans to close in late 2019, months ahead of the pandemic.
“We have a tenant controlling the real estate while not paying us and a lender who is as tired of the situation with Selina as we are,” Collier said in a statement, adding that “we feel confident that we will get this resolved.”
Collier said Selina owes several million dollars in rent, which he plans to sue to recover.
Selina, in a statement sent Friday morning following the publication of this story and an earlier request for comment from the company, refuted that it is in default of its lease due to its payment history. Instead, it alleged the landlord was in default of its loan before Selina even reopened the hotel.
“The landlord has clearly been in default with its lender obligations well before Selina’s involvement,” Selina said. “Since then, the landlord has been in default of its obligations under the lease in terms of the condition of the property when they delivered it to us and their failure to rectify defects, among others. We have sent several default letters to the landlord regarding those breaches. Many of those breaches remain uncured to date, and that has harmed our business.”
An attorney representing the lender, an entity formerly known as Latitude Management Real Estate Investors that is now part of LaSalle Investment Management, did not return requests for comment. A LaSalle spokesman did not respond to a request for comment.
Hotel Capital bought the hotel, then called the Tremont Chicago Hotel, and the now-shuttered Ditka’s steakhouse on the property from Marriott International for $19.1 million in 2018. The firm planned to put millions into renovating the 16-story, 122-room property, according to a press release.
The hotel shut down in March 2020, Collier said, and the restaurant closed two months later.
Hotel Capital master leased the hotel and restaurant space to Selina in 2021, and the London-based hospitality firm reopened the hotel that fall.
Selina became a publicly traded company in October 2022 at a valuation of $1.2 billion, and its shares were listed on the Nasdaq under the ticker symbol SLNA. Its share price initially spiked to $41 in the weeks after it started trading at $9.75, but the stock has since fallen to about 36 cents.
The company is in danger of being delisted, having received notice from Nasdaq earlier this month that it is not in compliance with the exchange’s $1 minimum bid price requirement, and that it has until March 6 to get its share price above that threshold.
“We have had nothing but problems with them from the outset,” Collier said.
Hotel Capital defaulted on the loan in October 2020, according to the complaint. The loan matured in June 2021.
Founded in the mid-2010s, Selina drew high-profile investors including WeWork co-founder Adam Neumann but struggled to take off in the United States.
The Mag Mile hotel isn’t the first Selina-operated property to face a foreclosure. East West Bank sought to collect on almost $26 million in debt secured by the Selina Chelsea NYC in February 2020.
Editor’s note: This story has been updated to add a statement from Selina.
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