Abraham Lincoln Hotel saga coming to an end
Giannoulias puts hotel up for auction to recoup taxpayer money

October 20, 2009

Illinois Treasurer Alexi Giannoulias will put the President Abraham Lincoln Hotel and Conference Center up for public auction in December to finally end a political and financial debacle that has dragged on for more than 25 years and cost taxpayers nearly $30 million.

Giannoulias announced today that the state will conduct a public auction of the property on Dec. 14 at the downtown Springfield hotel.

“This hotel has stood as a monument to the greed and cronyism of state government for far too long,” Giannoulias said. “It was built with the people’s money but benefited only those with political connections. Those days are over.”

If the 316-room hotel is sold, the auction proceeds will build on $5.65 million that the Treasurer’s Office has already recovered from a surety bond, which the original owners purchased to collateralize a portion of the state’s loan to build the hotel.

Chicago-based Sheldon Good & Company, a commercial real estate auction firm that was selected based on a competitive bidding process, will conduct the auction.

“The hotel sale will happen in the open, unlike the unethical practices and influence-peddling that hatched this scheme behind closed doors,” Giannoulias said. “Taxpayers will reap the profits of the sale and the Abe Lincoln Hotel will finally have the chance to serve as the economic engine that downtown Springfield deserves.”

Giannoulias noted that if there are no acceptable bids, the Treasurer’s Office will not sell the property at that time.

The Lincoln Hotel saga began in 1982 when its politically-connected owners received a $15.5 million state-backed loan through the Illinois Insured Mortgage Pilot Program to build the hotel, which opened three years later as the Ramada Renaissance.

The owners soon fell behind on their mortgage payments. State officials restructured the loan agreement in 1990 and required payments only when the hotel made a profit.

The owners stopped making regular payments in November 1997. Two payments amounting to less than $143,000 were made in 2002. In 2005, the hotel lost its franchise agreement, and Marriot International, Inc. pulled its flag.

By the time the Treasurer’s Office gained title to the property in March 2008, the outstanding principal and interest had ballooned to more than $30 million with interest growing at more than $70,000 per month.

Within two months of the state takeover, the Treasurer’s Office turned over the findings of an independent audit to the FBI suggesting that former owners of the Lincoln Hotel diverted $2 million for personal expenses – rather than show the hotel was in the black.

Under state ownership, the hotel has turned $1.3 million in profits. The state has re-invested $375,000 of this in the hotel, purchasing new mattresses and linens for the first time since it opened, and making much-needed repairs and renovations to the hotel lobby and restaurant.

Meanwhile, Giannoulias’ office has already collected a surety bond worth $5.65 million, which will be added to the final sale price. In 1995, the previous Treasurer’s administration wanted to settle on selling the hotel for $3.3 million, but the Illinois Attorney General blocked the deal.

“Bidders will see that in a short time with minimal funds we’ve helped to turn the hotel in the right direction,” Giannoulias said. “Our investments and profit data should drive up the price of this hotel so we can recoup as much money as possible for taxpayers.”

Sheldon Good will pay to market and advertise the hotel nationally and internationally before the auction takes place. On Dec. 14, an auctioneer will announce an opening bid and solicit bids from those in attendance. The highest bidder wins provided they meet the state’s minimum reserve and pass a background check.

“If we are not happy with the highest bid price, we will not accept the bid and will pull the property off the market,” Giannoulias said.