Hotel 71's new owner files Chapter 11 as expected
(Crain's) — The new owner of Hotel 71 has filed for bankruptcy protection as part of its plan to sell the Wacker Drive property.
An entity controlled by hotel's mezzanine lender, Oaktree Capital Management LLC, filed the Chapter 11 petition Monday, less than a month after taking over the property from a company controlled by developer Robert Falor. The move, which was expected, is the second trip to Bankruptcy Court for the 454-room hotel in eight months.
The filing will make it easier for Oaktree to sell the hotel by allowing it to avoid paying bills from dozens of subcontractors Mr. Falor hired for his failed plan to convert the property into a so-called condominium hotel. Oaktree recently hired a unit of Jones Lang LaSalle Inc. to market the hotel at 71 E. Wacker Drive.
Related story: Hotel 71 lender to put property on the market
The Oaktree affiliate, Chicago H&S Hotel Property LLC, has assets of more than $100 million and liabilities exceeding $100 million, according to the bankruptcy filing. One of its biggest creditors is a bank group that filed a foreclosure suit in July to collect on a $101-million senior loan.
The Falor-led entity that owned the hotel filed for Chapter 11 protection in March in an attempt to block an auction of the company by Oaktree, which was trying to collect $49 million on a defaulted mezzanine loan. The move gave Mr. Falor more time to refinance or sell the property, but those efforts failed and an Oaktree affiliate took control of the Falor-led entity on Oct. 3.
