Good point. I just read the Memorandum though, and it sounds like they are just asking to abandon all responsibility for the property because it is a liability. But the bank would move in, and I guess that would increase a sense of responsibility, if it were a local one anyway.
Riverside Info » About Riverside
Arcade: Winterizing, Sale, Tenant Status
(47 posts)-
Posted Monday Dec 15, 2008 13:34 #
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Wextrust Oak Brook hotel to go on the market
By: Alby Gallun Jan. 21, 2009
(Crain's) —” A court receiver plans to sell the Wyndham Drake Hotel, a 160-room property in Oak Brook formerly controlled by an affiliate of Wextrust Capital LLC, a Chicago-based investment firm accused of running a Ponzi scheme.The Wyndham Drake in Oak Brook. Photo from CoStar Group Inc.
The Wyndham Drake is one of more than 20 Wextrust properties the receiver wants to sell to recover as much money as possible for victims of the alleged $100-million pyramid scheme, according to court documents. The receiver also plans to hand back several local residential developments to lenders, moves that will wipe out Wextrust's equity stakes in the projects.
Timothy Coleman, who was appointed receiver of the Wextrust portfolio back in August, filed his plan for the Wextrust properties Jan. 15 and expects to begin marketing many of them for sale as soon as next month. Yet finding a buyer for the Wyndham Drake won't be easy, with many lenders sitting on the sidelines and many buyers fearful of a prolonged downturn in the hotel market.
Adding to the challenge, the hotel is struggling financially.“Although the hotel is generating cash flow, it is insufficient to cover debt-service payments and the renovations needed to maintain competitiveness in the hospitality market,— a court document says. “Recent market conditions affecting business and recreational travel have worsened the cash crunch.—
Given the state of the market, it's unlikely that the hotel, at 2301 York Road, will fetch close to the $20 million a Wextrust affiliate paid for it last January. Wextrust, which financed the acquisition with a $14.1-million loan from Regions Bank, planned a major renovation of the hotel, including a 60-room addition, but that plan is on hold.
Instead, the receiver has entered into a forbearance agreement with the lender, the court document says. Terms of the agreement were not disclosed, but the receiver is in talks with Regions Bank to extend the pact.
One hotel investor who asked not to be named estimated that the Wyndham Drake is worth about $12 million, which would mean Wextrust's investors in the hotel wouldn't get any money back.
Federal prosecutors and the Securities and Exchange Commission charged in August that Wextrust and its principals set up a Ponzi scheme by raising money from investors for specific investments and diverting at least $100 million of it to other, unauthorized purposes. Since then, Northbrook-based Hilco Real Estate LLC has been conducting an analysis of Wextrust's properties to determine which ones to sell and which ones to keep.
The receiver's office did not respond to a request for comment. A Hilco spokesman would not answer specific questions about the Wextrust assignment.
The sale list includes the 194-room Park View hotel in Lincoln Park, which also is estimated to be worth less than the debt owed on the property.
Related story: Bank trying to sell loan on former Wextrust hotel
Other local Wextrust properties going on the market are:
—¢ A 55,100-square-foot retail/apartment/medical office building at 1770 First St. in downtown Highland Park purchased for $13 million in 2004.
—¢ A 6,100-square-foot retail/office building at 45 S. Washington St. in Hinsdale purchased for $1.8 million in 2006.
—¢ A 17,600-square-foot retail/office building at 116 N. York Road in Elmhurst acquired for $3.7 million in 2005.
The receiver also expects to agree to non-judicial foreclosures on several of Wextrust's local residential developments, the largest being the Hamptons of Hinsdale, a 116-unit project in Hinsdale, according to court documents. In a non-judicial foreclosure, or deed-in-lieu of foreclosure, a borrower usually hands over a property to the lender voluntarily, avoiding an often expensive foreclosure process through the courts.
Other local candidates for non-judicial foreclosures include:
—¢ Stonebridge Woods, a proposed 28-unit single-family home development in southwest suburban Homer Glen that's currently in default.
—¢ An unfinished 48-unit condominium project at 2435 W. Belmont Ave. on Chicago's North Side.
—¢ A parcel at 2825 N. Oakley Ave., also on the North Side, where Wextrust and a partner planned 19 townhomes.The Arcade is just one of many...
Posted Wednesday Jan 21, 2009 20:56 # -
From the LandmarK:
Receiver ready to dump Arcade Building
Sale or foreclosure not too far in the distanceBy BOB UPHUES
EditorAfter four months of sitting in legal limbo, the Arcade Building in downtown Riverside looks like it will soon be sold or placed in foreclosure.
On Jan. 15, attorneys for the court-appointed receiver of the building presented a plan in federal court for divesting itself of the Arcade Building and other properties owned by Wextrust Capital Inc.
All of Wextrust's assets were frozen and put into receivership by a federal judge last August after the Securities and Exchange Commission charged that two of the company's top executives defrauded investors of millions in an international Ponzi scheme.
Last week, the receiver proposed a plan by which some of Wextrust's real estate holdings would be marketed and sold while others would be discarded as quickly as possible, even if it meant taking a substantial loss.
The Arcade Building is among nine properties slated to be dumped by the receiver, most likely by simply letting lenders holding the notes to foreclose.
"Foreclosure on the Wextrust residential properties would result in net economic benefits to the receivership estate when compared to other options," wrote Timothy Coleman of Dewey & LeBoeuf, who is the Wextrust receiver.
"Relinquishing distressed properties to the secured lenders would also reduce the administrative costs of the estate by relieving the receiver, other professionals and Wextrust employees of the responsibility for managing those properties."
Coleman hired Hilco Real Estate to determine the financial condition of Wextrust's properties and recommend a course of action for each of them. According to Coleman, Hilco has been approached by "several" potential buyers for the Arcade Building.
"Hilco is working with those potential buyers to consummate a transaction, with, hopefully, some return to the estate," Coleman wrote. "If a transaction cannot be accomplished within the short term, the receiver intends to relinquish the receivership's interest at the earliest appropriate time, probably through a deed in lieu of foreclosure."
In other words, the receiver would be more than willing for the mortgage company to simply take possession of the property.
Reached on Friday, Mitchell Kahn, a principal at Hilco, declined to discuss any aspect of the company's recommendations for Wextrust's properties.
Hilco's appraisals of the Wextrust properties were not included in court filings, since doing so might weaken the receiver's bargaining position.
The holder of the mortgage in the case of the Arcade Building is Rockford-based Amcore Bank, which loaned a Wextrust subsidiary $2.8 million in December 2004. Amcore, however, is having problems of its own. In the past year, the company's shares of stock have lost nearly 85 percent of their value. After trading at $22 per share early last year. Amcore's stock price as of Friday was at $3 per share.
While the receiver has not shown a great deal of interest in making improvements to the vacant historic building, Coleman did release funds to board up windows and to winterize the building's fire sprinkler system, which has been drained.
Bob Caraher, director of community development for Riverside, said that while the first-floor is not being heated, he believed that electricity was still being supplied to the furnaces heating the upper two floors, which were largely renovated during Wextrust's management of the property.
Posted Wednesday Jan 21, 2009 21:12 # -
The Arcade building is going back to the bank. The $3 million mortgage is held by CapFinancial CV3, LLC a unit of PrinsBank (www.prinsbank.com)in Prinsburg, Minnesota. Prinsbank has no idea what they are doing but seems to believe the village of Riverside is going to take care of the building while they figure out if they should finish construction or sell it.
At the end of the day someone would need to invest another $800,000 to $1 million to be able to rent it to tenants paying $15 - $30 for office space on the 3rd and 2nd floors and $20-25 per square foot for retail space along Riverside Road. You might get $15 along Quincy.
After you have spent all that money and completed all the work including leasing it up the property would be worth at most $2 million. $1 million less than what is owed to the bank. My guess is that the bank takes a huge hair cut and Don Price ends up buying it back and finishing his half-assed job on it.
Posted Thursday Jan 22, 2009 06:31 # -
So far he seems to have skated vis-a-vis the Feds - probably dropped the dime. But he owned - I believe - 20% of the deal so I bet he gets all kinds of interesting reading material in his mailbox as well. Somewhere I heard the story being pedelled that he said he wanted to live up in the previous owner's apt. when he retired. Reminds me of Arnold Rothstein telling the judge when asked about some of his winnings "The law classifies gambling as a misdemeanor." So much for the "Golden Age" of governmenthere in bucolic Riverside.
Posted Thursday Jan 22, 2009 08:41 # -
There has been no verification that the basement pipes have been drained, nor the ones serving Grumpy's, so they could burst.
I heard earlier the 2nd floor pipes were drained, now we're reading 'maybe' they are heated with electricity.
Why is it so hard to find out whether the winterization is sufficient to prevent bursting pipes?
Posted Thursday Jan 22, 2009 12:26 # -
I happened to speakto someone today whose parents put down a deposit in the Hamptons, that Wextrust condo development out south on County Line Road. She said they are getting it back. Hope so. I heard there was only one person living there - talk about a quiet neighborhood. Anyone know how many occupants there really are in the VC? When I walk my dog at night I se very few lights...
Posted Friday Jan 23, 2009 16:11 # -
No idea. Feel sorry for the guy who bought the penthouse. I wonder if the land it is on is now worth more than the building? Maybe the village will eminent domain it for the greater public good. No? Yeah, I don't agree with eminent domain either.
Posted Friday Jan 23, 2009 17:08 # -
Interesting story on the Madoff debacle. Woman lost $2 million and is now looking at sueing the SEC. It's a stretch, but could be an interesting idea. I wonder if anyone could think up an angle for the Villageto sue a developer who commits a crime, i.e. Wextrust, or better yet, Price/Wexford or what ever they call it this week. They waltzed in and promised to do one thing and then ruined a village asset, right?
Posted Sunday Jan 25, 2009 09:44 # -
Last I checked the Arcade building is private property. I don't see how the "Village of Riverside" as a municipal government has any standing in a legal case. Moreover, in these constrained times it is a questionable use of tax dollars to bring law suits to preserve private property. A conservancy is an alternative. Conservancies are private organizations. Sevaeral villagers could come together to form a conservancy that is fine, but it is not the role of government. The Village should insure that the health and welfare of the residents are preserved, but historic preservation of private properties is probably not wise/legal.
Posted Monday Jan 26, 2009 07:39 #
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