A Cook County judge issued an order of foreclosure against New York’s Thor Equities for defaulting on its $333.2 million mortgage on Palmer House Hilton Chicago, Crain’s reported. The order clears the way for the 1,635-room property, the city’s second largest after the Hyatt Regency, to be sold for a fraction of its value before the pandemic crushed the hospitality industry.
The ruling came less than a week after Wells Fargo took control of the 610-room JW Marriott Chicago in the Loop after the owner, a venture of Orlando-based Estein USA, defaulted on a $203.5 million loan. Wells Fargo won control with the sole $251 million bid.
Palmer House, among the first to suffer as Covid erupted, was valued at $328 million in March, compared with its $560 million appraisal in 2018, when Thor took out the mortgage. Lender Wells Fargo asked the court almost two years ago to appoint a receiver for the property, at 17 East Monroe Street, in one of the largest local foreclosure lawsuits against Thor over the defaulted loan.
Thor had another loan tied to the property that was sold to CMBS investors. Investors in the $94 million mezzanine loan will probably lose their stake in the property once a sheriff’s foreclosure sale is complete. Wells Fargo could buy the property and then sell it.
Thor fought against the foreclosure by arguing that the pandemic made it impossible for the company to make mortgage payments.
The judge determined that since there wasn’t a government order that forced the closure of the hotel, it still needed to make payments on the mortgage. Judge Edward Robles said a pandemic isn’t an “unforeseeable event” and that the company could have continued to pay the mortgage.
Thor also faces another potential foreclosure lawsuit, on the retail part of the Palmer House property. A trustee representing the investors of a $62 million CMBS loan on the retail space filed a foreclosure complaint in December 2020.
[CCB] — Victoria Pruitt