Oxford Capital Refinances Chicago’s Godfrey Hotel

As investors fret over big debts tied to urban hotel properties facing upcoming maturities, Quadrum Global is showing confidence in the Chicago market and a familiar partner.

New York-based Quadrum issued a more than $63 million loan to Chicago-based John Rutledge’s Oxford Capital Group for the Godfrey Hotel at 127 West Huron Street, public records show. The 221-room asset previously secured a $48 million loan taken out in 2017 from Citi Real Estate Funding.

With the deal, Quadrum is making its second investment into the 17-story property after it helped along its development back in 2011. That’s when Quadrum, in partnership with the Rutledge-led Oxford, acquired a construction loan for the property that fell into trouble while it was under development, eventually allowing the partnership to complete the project, which opened in 2014.

Rutledge’s firm has since refinanced it a couple times. He declined to comment and Quadrum did not return a request for comment.

Their latest deal for the Godfrey — a brand that Rutledge’s firm has since expanded to properties it owns and operates in Hollywood, Boston and Detroit — stands out as a safe outcome for the existing lender Citi while offering the borrower the chance to pull cash out of the asset with the excess debt.

It closed as downtown hotel market players remain skeptical of the prospects borrowers have for fully repaying debts secured by lodging assets that were issued before the pandemic.

Even with Chicago hotels beginning to refill to pre-pandemic occupancy rates — in fact, Illinois set a record for hotel tax revenue this year — rising interest rates have eaten into property values, presenting risks to borrowers with upcoming maturities.

Other borrowers have had to put up their own cash to pay down existing debts in order to receive a new loan, or enter complex financial structures.

Last month, White Oak Lodging Partners, the owner of the 523-key River North Marriott hotel at 410 North Dearborn Street, took out a $75 million loan from Chicago-based Prime Finance, according to Cook County records. The borrower was up against a fall deadline to satisfy a $120 million commercial mortgage-backed security loan secured by the asset.

It’s unclear how Indiana-based White Oak filled the gap between the previous loan’s maturity and its latest deal with Prime Finance. Recent appraisals of the property show its value has fallen 35 percent since the larger CMBS loan was issued in 2013, when it was pegged at more than $190 million, down to $123.5 million as of this month, according to DBRS Morningstar loan data. White Oak and Prime Finance did not return requests for comment.

The deal with Prime appears to be a shorter term loan than standard commercial real estate debts, meaning the borrower may still be searching for additional debt to cover the shortfall from its last maturity or put up its own cash to cover the gap.

For Quadrum, its River North hotel loan to Oxford marks the fourth Chicago property where the firms have done deals together. They formed joint venture investments into the Arlo Chicago hotel by Millennium Park and LeMeridien Essex Chicago at 800 South Michigan Avenue, and also developed the 479-unit multifamily tower at 808 South Michigan and sold it in 2020 to Iconiq Capital for $190 million.