Chicago Loop Reschke hotel developer refinances LaSalle Street Residence Inn
The financing, which includes both senior and mezzanine loans, was used to repay a $ 68 million construction loan and an undisclosed amount of senior equity from Goldman Sachs that supported the nearly $ 140 million redevelopment. dollars from the historic Prime Group building into a 381-room hotel that opened in 2015, Reschke said.
The previous loan was taken out in 2013 and expired last year, forcing Prime Group to refinance itself amid a crisis that has stunned the hotel industry and made it particularly difficult for lenders to accurately assess hotels.
Reschke declined to share details of the lenders or the new loan, which was not recorded in Cook County real estate records. But his company is becoming one of the only downtown hotel owners to refinance a property in the 11 months since the pandemic dampened travel demand.
With downtown hotel occupancy rates so low that many owners have suspended operations during the pandemic, finding a lender to bet on the future of a downtown hotel with new debt isn’t no small victory.
“This is a testament to an asset’s strength and performance since opening,” said Reschke, who was confident the local hotel market will achieve “a near complete recovery” over the next 15 months. “We beat our projection every year for five years. With this historic operating record, you can make a good case for (getting a new loan).”
While few hotel owners were able to refinance their properties during the crisis, many have found lenders willing to work with them to defer loan payments or modify their loan agreements in the hope that demand will come back with a vengeance. when the pandemic subsides.
This is one of the reasons cited by industry experts as to why a massive wave of foreclosures and hotel owners are ceding properties to their lenders. has not yet flooded the market with assets in difficulty.
With little clarity on what the pandemic will do to demand for long-term business travel, investors, lenders and hotel owners are unsure of how to properly rate hotels today, making it particularly difficult. determine the amount of debt that should have been attached to it. But Reschke said it was easier for some types of properties than others.
“I think the people who are having problems today are maybe the hotels that have average performance or even poor performance,” he said. “Assets that were truly stellar before COVID are still desirable investment vehicles for institutions.”
Reschke has a turbulent history with the historic 38-story LaSalle Street property, which his company purchased for $ 19 million in 2006 when it was an old-fashioned, half-empty office building. He was working on a plan in 2009 to convert it into an upscale boutique hotel with a brand linked to Marriott International, but was delayed by the Great Recession. After rotating to try to turn the property into a Residence Inn, the Reschke business was hit by a $ 50 million foreclosure action in 2012 for allegedly missing loan payments.
Reschke resolved this dispute when he landed the $ 68 million loan for construction to redevelop the property, a deal that included Goldman Sachs providing equity financing for the project.
Reschke said his company’s equity in the hotel had not changed with the new funding.