March 1, 2007

A court-appointed receiver today took control of the finances and day-to-day operations of the troubled President Abraham Lincoln Hotel in Springfield that owes the state nearly $30 million.

Hostmark Hospitality Group, of suburban Schaumburg, was appointed by a Sangamon County Circuit Court judge last week to make improvements to the hotel after its owners failed to repay a state-backed loan issued 25 years ago.

“The receiver will increase the value of the hotel by improving its financial health and reversing its physical decline after years of neglect,” said Giannoulias who supported the order. “Today’s actions are long overdue for a hotel that should serve as an economic engine for Springfield and its residents.”

In response, Giannoulias lifted the ban prohibiting Treasurer’s Office employees from booking rooms at the hotel and is now encouraging them to do so when traveling to Springfield on state business. Office employees had been barred from staying at the hotel because of the owners’ failure to repay the debt owed to the state. Hotel profits realized during the receivership period will go directly to the state and specifically used to pay off the debt from the loan.

“Allowing state employees to stay at the hotel will result in a new source of revenue that will cover some of the outstanding debt owed to taxpayers,” Giannoulias said. “It will also raise the occupancy rate as well as the value of the hotel so it will command a higher selling price at auction and lessen the financial burden on the state.”

With the receiver in place, Governor Rod Blagojevich announced that he is lifting his ban to allow employees from his office and other state agencies under his control to stay at the hotel.

“Taxpayers deserve to recover as much as possible from this bad deal brokered more than two decades ago,” Governor Blagojevich said. “Increasing state business will make the hotel more valuable when it goes up for auction. I support Treasurer Giannoulias’ efforts to protect the taxpayers’ investment.”

Under the order, the current owners are prevented from interfering with the hotel operations or deriving any financial benefit.

Serving as the hotel’s temporary manager, the receiver will run the hotel, pay its bills, enforce and/or terminate existing contracts, supervise employees, book rooms, provide guest service and operate the restaurant. The receiver will also actively explore entering into a new franchise agreement.

The receiver is required to file a report after 45 days that will identify longer-term improvements and submit monthly expense reports identifying receipts and disbursements.

In addition, the receiver will scrutinize the hotel’s books and management policies to provide some insight into the hotel’s past financial failings.

“There is absolutely no reason why this hotel should be losing money, particularly when signs of economic growth are clearly visible throughout the downtown area,” Giannoulias said.

In 1982, a group of investors received a $15.5 million state-backed loan to build the hotel. It opened in 1985 as the Ramada Renaissance, but the borrowers quickly fell behind in making payments.

The state renegotiated the loan twice, providing extremely favorable terms that allowed the borrowers to skip loan payments if the hotel did not turn a profit. In the past 10 years, the borrowers have made only two payments on the loan and have not made a single payment since 2002.

Mismanagement resulted in the hotel losing its franchise agreement with Marriott International, Inc. in 2005. Since then, revenues have continued to decline and the physical condition of the property has deteriorated.

“The time for second chances is over,” Giannoulias said. “The state and taxpayers cannot afford to give the borrowers any more concessions or bailouts.”

Giannoulias will continue to proceed with foreclosure of the property so the state can gain title to it. The state would then conduct a public auction and sell the hotel to the highest bidder. Money from the sale would be applied to paying down the borrowers’ debt.