Churchill Seizing Streeterville Hotel from Pebb Capital

Todd Rosenberg’s plan to convert a Streeterville hotel into apartments is ending in a $28 million foreclosure, capping a yearslong saga of financial distress and insider dealmaking for the property at 201 East Delaware Place.

Rosenberg’s firm, Boca Raton, Florida-based Pebb Capital, last month agreed to surrender the 18-story building to lender Churchill Real Estate. That company has offices in New York and Charlotte, North Carolina, and has been active in Chicago’s distressed property debt market, according to Cook County Circuit Court records. The hotel, which is out of operation, was known as the Gale Chicago in recent years and was previously called the Raffaello Hotel.

Churchill’s foreclosure suit, filed earlier this year, throws a wrench into redevelopment plans put forward by Pebb, which came into ownership of the property through its own takeover from another previous landlord, Miami-based Maxwelle Real Estate Group.

The foreclosure underscores the struggling Chicago lodging market, where downtown hotels have yet to fully recover from the pandemic. In a couple other instances, developers are pivoting to residential conversions. Churchwick Partners recently proposed converting the 221-room Sonesta Extended Stay Suites in Streeterville into apartments.

Distressed debt has complicated these pivots. At the Clark Adams Building, 111 West Adams Street in the Loop, a Blackstone entity that owns the distressed Club Quarters hotel in the building, along with foreclosing lender CWCapital, last year threatened legal action to block Primera Group’s $184 million apartment conversion, arguing an existing easement agreement prohibits rezoning without the hotel’s consent.

The Clark Adams project also faces a separate $15 million lawsuit from rival developers, Celadon Partners and Blackwood Group, who claim Primera stole their conversion proposal.

Back on Delaware Place, the former Raffaello property’s backstory is similarly riddled with controversies.

Another Miami-based developer, Crescent Heights, converted the building into hotel-condos in 2006. The concept fizzled, however, as Crescent began buying condos back a decade later, often at discounts from what it sold them for, leading to lawsuits between the condo board and Crescent Heights over expenses and commissions. Crescent settled the disputes by agreeing to pay $34.5 million to the hotel-condo investors in 2016.

In 2019, Maxwelle pulled off a bulk buyout of 140 rooms in the 175-key building, and took out a $29 million mortgage from New York-based lender W Financial. A Pebb Capital entity then appears to have bought the loan note from W Financial in 2022, leading to Pebb’s takeover of ownership after Maxwelle’s apparent surrender of the property to escape the debt.

Neither Pebb nor Churchill returned requests for comment, and neither did attorneys for the companies. Maxwelle also didn’t return a request for comment.

In December 2023, Pebb filed a zoning application to convert the Gale Chicago into 140 apartments, 56 hotel keys and ground-floor commercial space. But Pebb looks to have brought on Churchill as a lender to help fund its conversion, which also ran out of fuel.

Pebb executed four loan modifications with Churchill between 2024 and 2025 to extend its maturity date with Churchill’s lending entity. By August 2025, the Pebb borrowing entity admitted in writing it had stopped paying debt service and property taxes.

Foreclosure proceedings were initiated by Churchill MRA Funding I, LLC, acting as successor-in-interest to the original lender, Pebbmax Lending Co, LLC. It’s unclear from public records how much Pebb initially paid to take over the W Financial loan to Maxwelle, and it’s also unknown how much Churchill loaned Pebb for the deal that fell into foreclosure.

Pebb initially filed a formal answer to Churchill denying all defaults. Less than a month later, the borrower capitulated, signing a stipulation consenting to the foreclosure. The agreed judgment functions as a structural exit strategy. In exchange for surrendering the property, the lender waived its right to seek a personal deficiency judgment against the parent guarantor, Pebb Capital Management, LLC. Thus, the financial shortfall remains tied to the shell company.