Giannoulias: Gaining hotel title good news for state, region

Move to provide relief to taxpayers and enhance hotel's value

Monday, October 22, 2007

After effectively gaining title of the Collinsville Holiday Inn, Illinois State Treasurer Alexi Giannoulias visited the Metro East area on Monday and announced a new beginning for the financially troubled hotel.

“Taking title of the hotel from the property’s deadbeat owners represents a fresh start for a hotel that certainly has deserved better. Now – it will get better,” Giannoulias said. “The hotel should serve as an economic engine for Metro East, not a burden on the state.”

Giannoulias visited with hotel employees and met with local business and community leaders Monday to discuss the future of the property.

The former owners of the hotel owe more than $32 million in outstanding principal and interest on a state-backed loan they received 25 years ago. The last payment the borrowers made occurred in November 1998. As a result of last week’s judicial sale, the property’s trustee – Park National Bank – will take title of the hotel. The state is the sole beneficiary of the trust.

Looking ahead, Giannoulias intends to: maximize the value of the property; market the hotel on a national level to reach a broad audience of potential buyers; and sell it for top dollar at a public auction or sale in a transparent fashion.

“That will enable us to recoup as much as we can for Illinois taxpayers who deserve every penny of the $32 million debt the former owners have stuck them with,” Giannoulias said.

Giannoulias’ staff has begun discussions with Holiday Inn officials to determine what improvements can be made to enhance the value of the hotel so it fetches a higher sales price and also benefits the Metro East economy.

“Just as we want to provide financial relief to state taxpayers, we also want quality ownership so the hotel remains a bedrock of this community – employing local residents and supporting the local economy for a long, long time,” said Giannoulias, adding that he is intent on retaining the Holiday Inn flag.

Transferring the title out of the hands of the former owners has already increased the value of the hotel as it automatically erased all liens and outstanding judgments on the property.

On Jan. 12, a court-appointed receiver – Hostmark Hospitality, Inc. – assumed control of the operations of the hotel. Since that time, the hotel’s net profit has increased dramatically. Records show that during the first six months of 2007, the hotel realized $502,638 in net profit, compared to just $49,060 during the same time period in 2006.

“These figures demonstrate the importance of appointing a receiver following years of mismanagement,” said Giannoulias, noting that the receiver retained all rank-and-file employees. “The hotel is turning a significant profit even before substantial improvements have been made to the property. That’s a trend we anticipate will continue.”

The court also gave the receiver the authority to scrutinize the hotel’s financial books and management policies to provide insight into its financial failings.

The receiver evaluated financial and employment policies and uncovered possible wrongdoing, questionable accounting practices and misappropriation of funds, all of which allegedly benefited the owners of the hotel. In early May, the Treasurer’s Office provided the U.S. Attorney’s Office with more than 100,000 documents obtained from the Collinsville hotel and a third-party accountant.

The politically connected owners received a $13.4 million state-backed loan in 1982 but soon fell behind on their payments. In 1990, the state gave them a second chance, renegotiating the loan in their favor, providing them more time to pay it off and lowering the interest rate. As part of the deal, the borrowers were only obligated to make payments if they reported a profit.

Last May, a Madison County judge issued a judgment of foreclosure and sale, a move the borrowers did not contest. That action paved the way for the judicial sale to take place.