I originally had this in Morning Shorts, but then thought it deserved more play.
The downtown Springfield hotel deal, replete with politically connected insiders, has rankled government critics for years. The hotel, whose lead investor is GOP powerhouse Bill Cellini, has made just two mortgage payments since 1998, and zero in the past four years.
Springfield Mayor Tim Davlin wanted the local convention center board to buy out the mortgage after the bank filed foreclosure papers, at newly elected state Treasurer Alexi Giannoulias’ behest. Davlin appealed to Giannoulias to stall the foreclosure until details could be worked out. But…
Saying “enough is enough,” state Treasurer Alexi Giannoulias said Tuesday he will not halt foreclosure proceedings against the Abraham Lincoln Hotel and Conference Center in Springfield and wants the property placed in receivership until it can be sold.
In a letter to Mayor Tim Davlin and Mike Coffey Jr., chairman of the Springfield Metropolitan Exposition and Auditorium Authority, Giannoulias said he has concerns about their idea of having SMEAA buy the hotel mortgage to avoid foreclosure.
Under such a deal, Giannoulias said, “the state would once again be on the losing end of another bad deal as it would almost certainly receive less money” than if the hotel were sold at foreclosure.
“This financial boondoggle has cost the state and its taxpayers far too much money and has dragged on far too long,” Giannoulias wrote. “Enough is enough.”
Springfield boosters worry that new owners might convert the space to offices or condos, which could hurt the adjoining convention center’s business. Frankly, more condos downtown would be a huge boost to the area, and the convention center ought to live or die on its own. And the current owners apparently haven’t kept the place up. They lost their franchise agreement with Marriott allegedly because of the lack of improvements. I stayed there on New Years’ eve and, while it wasn’t bad, it certainly wasn’t up to standards.
The Journal-Register’s editorial today strongly supported the treasurer.
Having the hotel foreclosed upon and placed in receivership is not a rosy situation. But in the long run it is a preferable situation to having the place rot into the ground, leaving Springfield and the state taxpayers on the hook for millions.
Foreclosure and receivership won’t be pleasant, but it does provide a path for restoring the hotel to physical and financial health - and putting it where it belongs, in private, not public, hands. Attempting to again restructure loans for those who have been unwilling to pay them will merely continue the decline of what should be a shining jewel in Springfield’s historic downtown.
You can see the treasurer’s letter here [pdf file].
Thoughts?
- UPSET TAXPAYER - Wednesday, Jan 17, 07 @ 9:42 am:
How much money has Bill Cellini made off all his state rental properties and the Alton gambling boat since 1998? Thanks to those in power in state government Cellini has done ok for years.
While the normal taxpaying citizen has suffered through more taxes,fees,or what ever Blago and Ryan called income increases from my pocket to the state’s.Then there is less state services.
All that time the Cellinis of the world get richer and they and families sit on fancy boards using money that came from the pocketd of the taxpayers.
- publius - Wednesday, Jan 17, 07 @ 9:48 am:
many years ago a referendum on the question of building a convention center was held—the people of springfield solidly voted it down. so the power eleite went to the legislature and got approval of a convention center and smea through the back door—this has always been about taking care of insiders—and now the proposal is to take local taxpayers money and put it in bill cellini’s pocket—while he and his group of taxshelter doctors continue to own the place—it ain’t right, folks—and i’ll bet you if the u.s. attorney took a look at it he would find that there were profits which could have paid down the debt but that they were all filtered to some management company as fees and the insiders profited while the taxpayers got nothing
- cermak_rd - Wednesday, Jan 17, 07 @ 9:54 am:
Didn’t Judy take a hit for suggesting or doing something similar to this back in 1995?
- paddyrollingstone - Wednesday, Jan 17, 07 @ 10:26 am:
Good move on Alexi’s part. The State should get as much cash as it can.
- Dooley Dudright - Wednesday, Jan 17, 07 @ 10:50 am:
We “little people” woulda been foreclosed on ages ago, had it been our homes. (Grumble, grumble, grouse, grouse.)
Just watch: defying all common sense, the city and/or expo authority will try to buy it up in receivership ANYWAY (”Oooooh, lookee, aren’t we smart, we got it at a fire sale price!”) and try to reopen it and operate it as a hotel, irrespective of the fact that it’s a chronic loser. More tax money squandered — only different rats, and down a different rathole.
So I say: how about another use? A PUBLIC use at that (especially since we taxpayers are holding the bag)?
Turn it into downtown dorms for the University of Illinois at Springfield.
Hat tip: Richie Daley, who recently developed Loop dorms for School of the Art Institute students.
- Dooley Dudright - Wednesday, Jan 17, 07 @ 10:57 am:
Oh, and with the dorms right next door — hold some UIS classes and university events in the expo center!
- (618) Democrat - Wednesday, Jan 17, 07 @ 10:59 am:
I think it’s great having a State Treasurer standing up for the interest of hard working taxpayers all across Illinois. Enough is Enough. Good job Treasurer Giannoulias. Keep up the good work!
- Basil Fawlty - Wednesday, Jan 17, 07 @ 12:19 pm:
Smart guy, Alexi, this is the biggest time bomb left behind by previous administrations.best to explode it before it can hang on him. If he can keep his nose clean from here on out, he’s home free.
The hotel is Old Yeller. Everybody can cry, but it’s necessary to shoot the dog and start over. Condos there would revitalize the downtown after dark. or have another hotel chain take it over and run it right.
Let’s just be sure no Cellini involvement goes into the new ownership deals, and no outfit ties, and the city and state will make out all right.
- Whizbang - Wednesday, Jan 17, 07 @ 1:04 pm:
Well I can’t think of anything witty to say but, although I am a repub it is a breath of fresh air to see the a Dem shoot down the Springfield combine. Even Timmy could not help. Wow. And I thought they called Alexi the crook in the election?
- Capt. Obvious - Wednesday, Jan 17, 07 @ 3:11 pm:
Wonder why the Treas doesn’t collect what is owed. Put a lien on the partnership.
Hmmm.
Maybe a new group of whiz kids step in and grab a fee.
Didn’t the name change occur ’cause they would not pay the franchise fee.
Another benie is the workforce could start piling in there again. Yipee!
- Way Northsider - Wednesday, Jan 17, 07 @ 3:22 pm:
Way to go Alexi! It is great to see some commonsense and financial basics prevail in making this decision.
- PalosParkBob - Wednesday, Jan 17, 07 @ 4:54 pm:
How about the state making it into “dorms” for state legislators while the legislature is in session? That way we can cut back on their lodging “Per diems” and keep ‘em where we can keep an eye on ‘em. Opening up for students housing on the lower floor may also make sense.
What about office space conversion? The CDB is spending a fortune year after year renovating those white elephants near the Capitol.
If not, mixed use development (hotel, restaurant, condos, retail) ala Trump Spire in Chicago would seem to be the highest use for the property.
There’s no sense worrying about which politically connected crony will fill his/her pockets in this.
They always win.
It’s just a matter of protecting the taxpayers from losing worse than they need to.
- Rich Miller - Wednesday, Jan 17, 07 @ 5:02 pm:
Dorms? LOL. That would be a little too much fun i think.
- ArchPundit - Wednesday, Jan 17, 07 @ 5:05 pm:
So putting Lege Members and college students into the same building.
Nothing good can come of that.
- Leland Milton Goldblatt - Wednesday, Jan 17, 07 @ 7:37 pm:
Fine job and a thank you to the new Treasurer Alexi Giannoulias! Maybe he is going to be a mavrick.
- Ben Stone - Wednesday, Jan 17, 07 @ 7:59 pm:
I was in the press room furor when Judy announced a plan to settle this loan for about 25 cents on the dollar. She created quite a furor and was shot down by Jim Ryan and Jim Edgar. Now she’s looking like a genius.
One thing that always baffled me is that Cellini and company claimed they couldn’t make money with a big convention oriented hotel and as a result couldn’t make any payments on the principal. Yet at the same time they claimed there was no market for the hotel, and Judy said it would be almost impossible to find a buyer for it, the Crowne Plaza was going up on the edge of town. It seems to be full all the time with one convention after another.
I’ve always thought the lack of profit was merely an accounting trick aimed at dodging any real effort to pay off the taxpayer funded loan… and you an I have been left holding the bag.
- Smitty Irving - Wednesday, Jan 17, 07 @ 8:53 pm:
cermak_rd -
Judy would have let them off the hook for 25 cents on the dollar, and Cellini would still have owned the place.
Ben Stone - In the early days, the hotel went over board in maintenance - it was noted in Jim Ryan’s review in 1995 - that is why the place never turned a profit - $$ went into additional staff who owed their jobs to Bill Cellini. Gary Fears’ place in Collinsville was the same way. Jim Ryan thought it was a good deal - for 50 cents on the dollar.
- Arthur Andersen - Wednesday, Jan 17, 07 @ 10:02 pm:
A couple thoughts-
1) What doomed these hotels was the ORIGINAL loan deal that had the properties paying juice rates (12-15%) on construction loans and permanent financing.
2)Both hotels took forever to get built, and of course the first thing that happened once they got open was pressure on pricing, because the markets really couldn’t support the original flags (Hilton and Marriott) based on a mix of government and “convention” (i.e. group rate) business.
3) By the time the loans were renegotiated, the principal balances had roughly doubled anything the original proformas had ever contemplated. The “we pay you when we are making money” idea was basically the only way to avoid defaulting on the hotel franchise agreements which require minimum annual spending for maintenance and for future capital needs.
4) “Smitty Irving” you are full of crap. I’ve read that entire review (by U of I finance professors) and there is not one word about overstaffing. Get a life.
5) The real problem now for Fears/Cellini is that the foreclosure means that they lose big, big collateral that their general partner group placed to secure the initial loans. Not enough to wipe out either one, but more than anyone would want to give up and probably why they haven’t tossed the keys back to JBT many moons ago.
Good luck to Alexi & Co. on this workout. It won’t be easy. All you real estate, investment and hotel experts out there should keep in mind that to get a “flag” or hotel franchise, all the major names will require cash on the barrelhead, from a new owner, that all the deferred maintenance, etc. be corrected before their name goes on the door. That is easily a $5 million check at the A.Lincoln.
Personally, I like the legislative dorm idea. We need more excitement in this town.
- Frank Booth - Wednesday, Jan 17, 07 @ 10:38 pm:
Palos Park Bob,
Lawmakers and students … living together.
Let me tell you a story about this former congressman from Florida …
From a news perspective, it’d the the goose that lays the golden eggs year after year. From a moral standpoint, egad man, what are you thinking?
- Whizbang - Thursday, Jan 18, 07 @ 12:13 am:
Ok. Ok. So the idea of students and the General Assembly is a bad idea. But what about those twenty to sixty homeless people who live under the overhangs of the Springfield City Lincoln Library? Hey now there is a thought.
- Anon again - Thursday, Jan 18, 07 @ 12:17 am:
Art And,
I like you thoughts but you forgot one they new what the loan rate was they new the market and still jumped in, hell i would have taken the deal they got and probably paid the state back more than they have or maybe if you dont ever have to pay something back you just wouldnt do it. If i was a client of art ader and i told you i had a mortage that i didnt have to pay unless i showed a profit meanwhile i make 25 million on a casino deal what would you advise me to do make payments that i didnt have to. You guys at art ander better stick to counting the beans and let the Celinis of the world show you how to make the beans, cause he would kill you guys in a head to head competition.
- Bill - Thursday, Jan 18, 07 @ 7:10 am:
The hotel, while showing its age in places, is still much nicer than the dump across the street. The real problem is that there is just not much demand for rooms in the downtown patch except during session. The hotel, along with the crumbling convention center, should have never been built.
I really resented Alexi at first, but he is starting to win me over with moves like this.
- Truthful James - Thursday, Jan 18, 07 @ 8:38 am:
Repeated from yesterday’s comment in morning shorts:
Treasurer Giannoulias is dead on regarding the Ramada Renaissance swindle. There were two deals, this one for the Republican lobbyists and a Hilton downstate for Jerry Costello and gary fears in Collinsville. As a banker, he is ideally experienced to know a sack of manure when it crosses his desk.
The pressure from Springfield officials is disingenuous. The hotel and its revenues will not vanish with foreclosure and transfer of ownership. Perhaps only Bill Cellini will vanish.
Like to see some forensic accounting done in any event.
BTW the fate of Convention Centers in undersized places with less business is shown in Decatur. The City pledged itself to fund the operating losses and shortfalls in horserace tax money. (Bonds had been issued under legislative permission by the Metropolitan Exposition Center Authority (name shortened) They wound up effectively moving their City hall into the building.
One has to admire the Cellini chutzpah of attaching Honest Abe’s name to this piece of work.
- Jake from Elwood - Thursday, Jan 18, 07 @ 10:32 am:
I live in the suburbs and have business in Springfield a handful of times each year. I am happy with the service and amenities at the Lincoln hotel to the Hilton or Crowne Plaza any time. If its good enough for Barack, it’s good enough for me. Four stars.
Oh wait, I thought this was the expedia.com website.
- Smitty Irving - Thursday, Jan 18, 07 @ 5:21 pm:
Arthur Andersen -
The “overstaffing” was taken from comments made by Jim Ryan’s people, as they appeared in the State Journal Register’s and local tv and radio coverage of the story. If it is not in the report (would you post it here for all to see?), then that is what I get for relying on the 1990s Springfield based media … .
- Arthur Andersen - Thursday, Jan 18, 07 @ 6:25 pm:
Arthur Andersen -
After more reflection, I do remember the media saying Ryan saying operations expenses were higher than the industry average. And that JBT’s people and Cellini disuputed Ryan’s experts.