One of the biggest investors in the Marriott Pere Marquette project has filed to start foreclosure proceedings in Peoria County, Ill., Court.
The INDURE Build-to-Core Fund is asking the court to enter a judgment of foreclosure against the hotel and its related businesses in an amount of nearly $39 million, and that the court order the property to be sold in order to pay back the fund
The filing includes the Pere Marquette, the Courtyard by Marriott and the parking garage that the linked hotels share.
It also names other parties that have investments in the property, including the city of Peoria, which holds a $7 million mortgage on the property but falls in line behind the other consortium — the lead lenders on the deal — in terms of being paid.
Peoria City Manager Patrick Urich on Monday called it "unfortunate that it's come to this point," but stressed that the city was working on ways to protect public money involved.
"We are going to take a long look at what our options are when it comes to a foreclosure proceeding on the hotel," he said. "We will also look at and try and anticipate if the developer decides to file for bankruptcy, as he has done in East Peoria (with separate developments). That may have an impact on that. But at this point in time ... we'll be taking a very serious look at ways we can protect the taxpayers' interests."
While no bankruptcy has been filed in relation to the Pere or any other properties on the block, it is one way of short-circuiting foreclosure proceedings while a business is reorganized and debts are paid. So, too, could a successful refinancing or other agreement with the primary lender bring the effort to a halt.
The next scheduled hearing on the foreclosure case is not until Aug. 7.
The foreclosure filing comes in the wake of an ongoing effort by developer Gary Matthews to refinance his debts in an attempt to keep the Marriott name on the hotel.
Marriott has twice extended the deadline on removing the company's flag, though the time increment has decreased with each extension. A new deadline looms March 23 for the Pere days after the annual state boys basketball tournament concludes, with a separate date in April for the Courtyard.
Urich was optimistic, though, that the Marriott designation would remain on both properties.
"I think that with the foreclosure proceeding in place that Marriott's name will stay on the hotel for the foreseeable future because of that," he said.
Retaining that affiliation or a similar one — and being able to remain in a nationwide booking network — can ultimately ensure that the hotel remains financially viable, preserving the sales and hotel tax revenue that covers payments on tens of millions of dollars of taxpayer-backed bonds that funded the project.
"The city has a vested interest in seeing that the hotel remains a going concern," Urich said. "With the amount of people that have been staying at the hotel over the past year and the amount of top-line revenue the hotel generates, I don't believe that's going to be an issue."
The Chicago-based attorney for the consortium seeking foreclosure did not return a message left Monday afternoon.
There was little reaction from Matthews or his company, GEM Hospitality.
"We've received the notice and we are pursuing options to ensure our continued success," the company's statement said. "We look forward to two very busy March Madness weekends at the Pere Marquette Hotel — Peoria's crown jewel.
The first of those weekends occurred last weekend.
