Purple Hotel owner files Chapter 11
(Crain's) — The long-running saga of the Purple Hotel in Lincolnwood took a new twist Wednesday when its owner filed for bankruptcy protection and floated a new plan to raze the shuttered hotel.
The Chapter 11 filing in U.S. Bankruptcy Court thwarts a foreclosure suit that was filed in April against the Purple Hotel, an eyesore that village officials want torn down and redeveloped. The owner of the 293-room hotel, a group including Skokie investor Donald Bae, plans to bring in an auction company to fund the demolition and sell off the land, generating proceeds to pay off its debts.
“We hope to have this whole thing done in four to five months,” says Mr. Bae’s lawyer, Paul Bauch. “A foreclosure suit would take years. We believe a bankruptcy is more efficient.”
The Bae venture had been facing a $4.2-million foreclosure suit from First Midwest Bank N.A., which recently agreed to sell the loan on the bright-colored hotel at 4500 W. Touhy Ave. The sale is scheduled to close next week.
Steven Elrod, a partner in the Chicago office of Holland & Knight LLP who represents the village, and Randy Podolsky, managing director of Riverwoods-based Podolsky Northstar CORFAC International, which was hired by the bank to sell the mortgage, both confirm an agreement is in place with a buyer of the note.
They decline to say who is acquiring the loan, but in a public village board meeting Tuesday night Jake Weiss, president of Skokie-based Weiss Properties Inc., identified himself as the pending buyer. Mr. Weiss was not immediately available late Wednesday. Also at the meeting, the village awarded Chicago-based Delta Demolition Inc. the contract to knock down the hotel.
A note purchase would set the stage for the buyer to foreclose and redevelop the property, which sits at the busy intersection. A redevelopment would likely involve retail combined with either residential or hotel space, and the village has created a tax-increment financing district there to subsidize the project.
But Mr. Bauch, a managing member of Chicago-based Bauch & Michaels LLC, says the Chapter 11 filing would prevent certain steps toward foreclosure, including the appointment of a receiver.
The Chapter 11 filing lists both the hotel owner’s assets and liabilities between $10 million and $50 million. The filing lists Mr. Bae’s father, Kun Chae Bae, as the president of the family’s ownership group, Village Resorts Inc.
Mr. Bauch says the elder Bae has poured more than $10 million into the hotel, beyond the overdue loan balance and other fees. Foster Bank of Chicago has liens on two adjacent parcels for about $3 million, Mr. Bauch says.
The Baes’ attorney, who didn’t join the years-old legal tussle until being hired in recent months, says the reorganization plan includes an offer of a $2.2 million loan from auction company Sheldon Good & Co. The loan would allow the Baes to level the hotel and buildings on the two adjacent sites, then bring in Sheldon Good to auction the entire property, which the owners believe is worth at least $15 million, Mr. Bauch says.
“We think the whole is worth more than the sum of the parts,” Mr. Bauch says. “The idea would be to clean up the site, which involves taking the buildings down, and offer the entire (three-parcel) site for sale.”
Mr. Elrod says the village plans to move forward on a previous court judgment to demolish the hotel. He says the property owners’ bankruptcy filing has no bearing on the village’s plans, but he doesn’t oppose it either.
“Anything that moves the property closer to redevelopment in a comprehensive, coordinated and planned manner is favored by the village,” he says. “If bankruptcy does that, if foreclosure does that, if demolition does that, the village supports it.”
Take a Tour Inside the Infamous Purple Hotel
Take a look at some of the galleries we found on the web with pictures of the Purple Hotel in its current state.