REO Monitor: Allerton Hotel – Chicago

The owner of Chicago’s Allerton Hotel, located along highly coveted Michigan Avenue, is considering agreeing to giving up the property in a deed-in-lieu of foreclosure action. The 443-room hotel is owned by San Francisco-based Chartres Lodging. The property secures $79 million of loans, which have recently matured.

According to a report on ChicagoRealEstateDaily.com “the hotel hasn’t been generating enough cash flow to cover debt service on the $40-million securitized loan, let alone the two others. Net cash flow for the 12 months that ended Sept. 30 totaled $1.36 million, vs. debt service of $1.45 million on the CMBS loan, which carried an interest rate of just 1.2%, according to Bloomberg L.P.”

This news comes on the heals of Smith Travel Research announcing its optimism for hotel industry operation conditions at The Hunter Hotel Conference in Atlanta. “‘It was a long, cold winter in 2009 and ’10, but spring is in the air,’ said Freitag, during an industry data presentation. ‘The good news is there is less bad news. The construction pipeline is emptying and demand is slowly improving. The big question that remains is what happens to rates.’”

According to an article on NREIOnline.com, “Smith Travel’s 2010 forecast calls for flat occupancy and a 3.2% drop in both rates and revenue per available room (RevPAR). Next year, occupancy and rates will rise by about 2% with RevPAR up 4.2%. The forecast differs by market segment, with economy properties faring the worst, with RevPAR forecast to be down 6.7%. In contrast, midscale hotels without food and beverage are projected to have the best year, with RevPAR down only 1.2%”