State of Illinois buys hotel in plan to recover debt

By the Associated Press

Journal Gazette-Times Courier, Mattoon and Charleston, IL

Published Wednesday, March 5, 2008

UPDATED 6:45 PM  SPRINGFIELD, Ill. (AP) — The state of Illinois bought a Springfield hotel Tuesday in an effort to recover part of a debt that has been building for more than 25 years.

State officials are taking ownership of the President Abraham Lincoln Hotel and hope to sell it and recover some of the nearly $30 million the hotel's owners owe to the state.

"Today's legal proceedings represent a fresh start for a hotel that has certainly deserved better and now will get better,'' state Treasurer Alexi Giannoulias said. "This hotel should serve as an economic engine for Springfield, not a burden on the state mired in debt.''

Formerly named the Renaissance, the hotel was built in 1982 with $15.5 million in state loans. But the hotel's various owners have paid almost nothing on the loan, and the debt has now climbed to $29.5 million.

At one point, the loan was restructured so that the owners were required to make payments only when the hotel showed a profit. The owners then claimed the hotel was consistently losing money, although it's made $1.3 million in profits since it was placed in receivership nearly a year ago and a new management company took over.

Bidding on the hotel started at $1 at an auction Tuesday morning. A lawyer for the previous owners then upped the ante to $2. After a few more small increases, state officials ended the bidding with a $100,000 offer.

Taxpayers won't actually have to pay the $100,000 since the hotel already owes the state far more.

The plan is to sell the property to a buyer, possibly a national hotel chain, within the next six months at a public auction. State officials said they will consider making renovations if it will make the hotel more appealing to buyers.

Giannoulias would not speculate on how much money the hotel might bring, but he predicted it would be significantly more than $3.7 million.

That's the amount his predecessor, former Treasurer Judy Baar Topinka, proposed to accept as settlement of the hotel's debt in 1995. The attorney general blocked that settlement, and the situation has dragged on since then with taxpayers getting almost no payments from the hotel.

The President Abraham Lincoln isn't the only hotel taken over by the state. Officials took control of a Collinsville hotel that was also built with state loans that have never been paid back, creating a $32 million debt. They hope to sell that property, too.