St. Louis company has winning $5.2 million bid for Holiday Inn in Collinsville
St. Louis firm makes winning offer

Byline Missing
News-Democrat, Belleville, IL

Published Friday, July 4, 2008

COLLINSVILLE - A St. Louis company that owns 16 area hotels was declared the winning bidder Thursday for the Holiday Inn in Collinsville.

The Illinois State Treasurer's Office announced that Lodging Hospitality Management will pay $5.3 million to purchase the 228-room hotel at 1000 Eastport Drive.

The firm owns Hilton, Sheraton, Holiday Inn, and Quality Inn franchises throughout the metropolitan area.

This sale ends state Treasurer Alexi Giannoulias' effort to get the state out from under a property that had amassed millions of dollars in debt.

The state initially loaned investors Gary Fears and B.C. Gitcho $13.4 million in 1982 to build the Collinsville Hilton, which later became a Holiday Inn, at 1000 Eastport Drive. Over time, the mortgage payments were missed and the debt wasn't repaid. The debt on the Collinsville hotel swelled to more than $32 million.

The state has realized an additional $5.1 million in profits since it took over the property, outstanding letters of credit and personal judgments against Gitcho and Fears.

With the $5.3 million gained in the sale and the $5.1 million in other earnings, the state recovered $10.4 million in the deal. But that leaves a difference of almost $22 million in losses.

In a statement released Thursday by his office, Giannoulias noted that the state collected $10.4 million in the deal but acknowledged "this has been a sad chapter in Illinois politics and a burden on taxpayers."

Craig Cobler, senior vice president of development for Lodging Hospitality Management, said the 22-year-old company finds distressed hotel properties such as the Collinsville Holiday Inn and renovates them. He said the firm plans to spend $9 million to renovate its new Collinsville property.

"We reposition them in the market to make them successful," Cobler said. "We've done it most recently with the Hilton at the Ballpark downtown. We converted it from a Marriott to a Hilton. We did an exact copy of what we'll do with this property with the Holiday Inn in Westport in St. Louis and converted it to a Doubletree. Both hotels have been successful."

Giannoulias forced the property into receivership in January 2007 and collected sealed bids for the property on May 21.

Records filed in court by the hotel's receiver, Hostmark Hospitality Group, revealed that the hotel had earned a net profit of $586,000 last year from January to November. The hotel had lost $818,000 during the same span the year before. Since the state forced the property into receivership, the hotel has generated $672,000 in net profits.

"The future of the hotel looks bright as the new owners have indicated they will invest significant dollars to renovate and restore the property so the hotel will contribute to the economy of southwestern Illinois for a long, long time," Giannoulias said.

The auction was initially delayed so each bidder could have time to consider an undisclosed financial incentive package, which the city included to help ensure the long-term stability of the hotel.

The treasurer's office reported that the incentive package could be potentially worth several million dollars over the next 20 years, "depending on the willingness of the new owner to invest in improvements to the property and their ability to run a successful business that would bring tax revenue back to the community."

Collinsville Community Development Director Paul Mann said the city is happy to be past this "daunting exercise."

"We are pleased at the result," Mann said. "LHM has a great track record. We feel comfortable with working out a partnership along with them and the Gateway Convention Center. All along, it's been our priority that we get a quality hotel and quality convention hotel service in the Eastport area to replace the debacle that was the Holiday Inn."

The Holiday Inn name will soon be removed from the property and a new franchise will assume ownership. Holiday Inn has sold the local franchise license to another party.

"We are confident that LHM will provide a flagship that will complement the convention center and their operations as well as continue to help support and be a major anchor in the Eastport area," Mann said.

Contact reporter Will Buss at wbuss@bnd.com or 345-7822, ext. 24.