Foreclosure order issued for Springfield hotel

Treasurer Giannoulias aims to end costly ordeal and sell hotel

January 16, 2008

A judge has entered an order of foreclosure for the President Abraham Lincoln Hotel and Conference Center in Springfield, marking a significant step toward ending a 25-year political and financial debacle that has cost Illinois taxpayers nearly $30 million, State Treasurer Alexi Giannoulias said today.

The foreclosure order, signed by Sangamon County Circuit Court Judge Patrick J. Londrigan on Monday, is the first step in removing the hotel from the owners’ hands and paves the way for the Treasurer’s Office to gain title to the hotel. Giannoulias then plans to conduct a public auction to recoup as much as possible for taxpayers.

“The days of sweetheart deals and cronyism at taxpayer expense are over,” said Giannoulias, who has sought to foreclose on the property since taking office a year ago. “After 25 years, we need to finally put an end to this ordeal once and for all. It’s dragged on for far too long and cost the state far too much money.”

The owners of the hotel were granted a $15.5 million state-backed loan through the Illinois Insured Mortgage Pilot Program in 1982 to build the hotel, which opened three years later as the Ramada Renaissance.

The owners soon fell behind on repaying the loan, but the state restructured the loan agreement in 1990, which enabled the owners to make payments only when the hotel made a profit. In 2005, the hotel lost its franchise agreement, and Marriot International, Inc. pulled its flag.

The owners have made only two payments in the last 10 years and none in the last five years, the last occurring in August 2002. The owners owe $29,542,784 in unpaid principal and interest, which costs Illinois taxpayers more than $2,300 per day.

The order of foreclosure extinguishes the borrowers’ ownership rights. The judge must enter a similar agreed order involving other nominal parties, including the City of Springfield and the Springfield Metropolitan Exposition and Auditorium Authority (SMEAA), before a judicial sale takes place.

An anticipated judicial sale, which should take place later this spring, will remove the title of the property from the borrowers’ hands and erase all liens and outstanding judgments, which will make the hotel more attractive to potential buyers.

Giannoulias noted that the Springfield foreclosure order comes just a few months after his administration gained title to the Collinsville Holiday Inn, which was also built as part of the Illinois Insured Mortgage Pilot Program and whose owners similarly failed to repay the state for a loan to construct the hotel.

Last October’s proceedings in Collinsville established a precedent that supported his administration’s legal position that foreclosure should take place for the troubled hotels. More important, the Collinsville foreclosure signaled that the same result was inevitable for the Abraham Lincoln Hotel.

In addition, the owners in Springfield have been forced to pay legal expenses out of their own pocket since a receiver took over running the hotel on March 1. Previously, the owners had used hotel profits to defend against the state’s efforts to foreclose on the property while foregoing their obligation to state taxpayers.

“After gaining title of the Collinsville property, we filed documents in Sangamon County to expedite the foreclosure of the Springfield hotel,” Giannoulias said. “The owners saw what happened in Collinsville and were prohibited from using taxpayer dollars to fight us.”

During the first six months of receivership, the Abraham Lincoln Hotel showed a net profit of more than $927,000, compared to only $126,000 for the same time period in 2006. The Treasurer’s Office has also hired forensic auditors to examine the hotel’s finances and accounting practices.

“Given its location in the heart of the downtown area, which has been revitalized in recent years, I always believed that this hotel was profitable,” Giannoulias said. “Financial records confirm this and show a positive financial trend.

“The Abraham Lincoln Hotel should serve as an economic engine for the City of Springfield and its residents, not as a burden on the state,” he added. “Like the Collinsville hotel, this hotel was built on false promises, but its future is finally beginning to brighten.”