BETHESDA, MD—Locally-based DiamondRock Hospitality has sold the 443-room Allerton Hotel Chicago to Warwick International Hotels. The sale is the last chapter in what has been a multi-year adventure for the REIT.
Under the terms of the sale, Warwick is assuming the loan on the property and it is making a $6 million principal payment to DiamondRock. This reduces the loan principal balance to $58.5 million. There were no other changes to the terms of the loan.
The hotel originated as a distressed debt investment by DiamondRock that then got ensnared in a bankruptcy dispute with the former owner. The end result, though, is a favorable one for the REIT, according to CEO Mark W. Brugger. "The sale of the Allerton Hotel is a positive event for DiamondRock as we received a $6 million principal payment in conjunction with the loan assumption and improved our security."
In 2010 the REIT acquired a distressed loan secured by the hotel for $60 million. A subsequent bankruptcy filing and related litigation didn't get resolved until 2012 when DiamondRock and the affiliates of Petra Capital Management settled their differences. Under that agreement DiamondRock received a $5 million principal payment and was able to restructure the debt. A call to DiamondRock was not returned by press time.
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