McHugh Closes McCormick Place Hotel Debt Gap to Refinance

Patty McHugh and David Duncan came up with some cash to hold onto a big Hilton-branded hotel complex connected to Chicago’s McCormick Place convention center.

McHugh Enterprises, the development arm of Chicago mega-contractor McHugh Construction, and Duncan’s firm First Investors refinanced their Hilton-branded South Loop lodging asset with a $92 million floating-rate, interest-only loan from Access Point Financial.

The deal comes out to roughly $20 million shy of the mortgage the landlords secured six years ago, before the pandemic reset the deck for hospitality in Chicago and across the globe.

It’s unclear what kind of financial mechanism — an out-of-pocket paydown or a preferred equity arrangement with an outside party — allowed McHugh and First Investors to close the debt gap; Walker & Dunlop, which arranged the debt deal, said there wasn’t any subordinate capital involved, pointing toward the borrowers paying down the difference.

Either way, the smaller first mortgage reflects today’s tighter lending climate and the recalibration of hotel valuations since 2019. Lender ACORE Financial’s recent $187 million foreclosure lawsuit against longtime Chicago hotelier Su-Mei Yen for a separate South Loop hotel complex and the same lender’s seizure of a River North hotel have jolted the city’s hospitality industry.

The loan was for the Hiltons at McCormick Place at 123 East Cermak Road, the 466-key tri-branded property connected to the city’s convention center, Walker & Dunlop said in a release.

McHugh and First Investors developed the 23-story hotel tower in 2018 with a $78 million mortgage from Wells Fargo, The Real Deal previously reported, when the property was hailed as the country’s first triple-branded Hilton.

They refinanced in 2019 with the $112 million mortgage from CrossHarbor, meaning they could have pocketed some of the difference with a cash-out deal.

The deal with Access Point underscores how refinancing math has shifted for even strong-performing hospitality assets. What once penciled out at nine figures now looks more modest, as rising interest costs and lender caution reshape the post-pandemic playbook for hotel owners.

Patty McHugh, chair of McHugh Enterprises, stated that the property “continues to thrive,” crediting Walker & Dunlop for navigating the process amid volatile capital markets. The company’s construction arm also built the hotel, which combines Hilton Garden Inn, Hampton Inn and Home2 Suites brands under one roof.

A McHugh spokesperson didn’t immediately return a request for comment regarding how the debt gap was closed from the CrossHarbor deal.

The fresh capital gives the ownership group breathing room in a higher-rate market that’s throttled hospitality deals citywide.

Even as Chicago’s convention business rebounds, hotel trades have been scarce, and refinancing packages increasingly reflect smaller principal balances as values lag behind pre-pandemic highs.

Walker & Dunlop’s Aaron Appel and Dustin Stolly led the capital markets team for the Hiltons at McCormick deal, while the firm’s Jay Morrow and Carter Gradwell advised the borrowers. The firm touted the asset’s strong performance — 120 percent of submarket revenue per available room — and its positioning next to the 2.6-million-square-foot McCormick Place Convention Center, which draws about 3 million visitors annually.