Bank Foreclosed Hotels in Chicago, Miami and Las Vegas

by on Foreclosures

Three bank foreclosed hotels in Chicago, Miami and Las Vegas were added this month to the growing listings of hotel foreclosures across the country.

In Miami Beach, the 334-room hotel Gansevoort South was foreclosed by Credit Suisse and will be sold off in a foreclosure auction next month. Father-and-son hotel developers Michael and William Achenbaum failed to pay their construction loans after their plan to convert some hotel rooms into condominium-hotel units was stopped by the meltdown of the South Florida condo market.

The Achenbaums were forced to rely on revenues from hotel operations which also declined. They are however hopeful that they can retain ownership of the hotel by buying back the hotel at the foreclosure auction.

In Chicago, the 122-room Hotel Burnham, which resulted from the renovation of Daniel Burnham’s early 20th-century building in 1999, was foreclosed by Bank of America after hotel owner Dan McCaffrey failed to pay his $36-million development loan.

According to Chicago hotel industry analysts, Hotel Burnham, just like many bank foreclosed hotels in other cities, faced severe financial difficulties because the owners refinanced their original loan into a much higher amount in 2007, when prospects for the hotel industry were starting to get gloomy.

Last year, hotel occupancy rate dropped to 73 percent and fell further this year to 69 percent. Room rates averaged $203.30 last year and then dropped further to an average of $164.72 this year.

In Las Vegas, the nongaming 64-room Artisan Hotel & Spa, which is well known for its fine art collection and lounge entertainment, was foreclosed by Garrett Capital, acquirer of Oregon-based Citizens Bank which failed to collect on a development loan totaling $7.8 million from hotel owners Douglas and Ninette Da Silva.

When the Da Silvas filed for bankruptcy reorganization in 2008, they stated that the hotel had $18.3 million in assets and $7.85 million in liabilities. It was also reported that they had 41 hotel employees, had over $115,000 in revenues and around $18,000 in net profit in December last year.

In contrast, the $280-million 188-room Elysian hotel in Chicago opened to optimistic reviews this month not only because of its offer of value and luxury but also because it does not have problems with bank financing. Unlike a lot of bank foreclosed hotels which collapsed due to high-cost bank loans, the Elysian was developed through private financing.