Troubled hotel is now in state's hands, to be sold
COLLINSVILLE, Ill. -- The state of Illinois effectively has taken ownership of a Holiday Inn in this Metro East community, hoping to recoup what it can from the site built with millions of dollars in state loans that have not been repaid.
About a dozen interested buyers attended Thursday's auction at the Madison County courthouse in Edwardsville. But the state -- eager to keep the property to get what it can during a commercial sale later -- set an opening price of $25,375,653.92, successfully discouraging anyone from bidding for the hotel county tax records show is appraised at about $8.9 million.
With no willing buyers, the property's trustee, Park National Bank of Oak Park took the title by default, essentially putting the site in the state's hands because the state is the sole beneficiary of the trust.
The value of the hotel, which is more than $30 million in debt and remains open, instantly appreciated Thursday because all liens and outstanding judgments on the property were erased.
State Treasurer Alexi Giannoulias wants the hotel's commercial sale to recoup what the state can for taxpayers.
The hotel got $13.4 million in state loans dating to 1982 as part of an effort to stoke economic development, Giannoulias spokesman Scott Burnham has said. It was one of 18 hotels, shopping centers and office buildings that received a total of $120 million in loans, he said. All repaid the loans except the Collinsville site and a Springfield hotel also moving toward foreclosure.
The owners in Collinsville had paid nothing since late 1998, and the debt as of May 1 ballooned to more than $30 million, including $15.6 million in outstanding interest, Burnham said.
The state took control of the property in January, and the newly elected Giannoulias ordered the books scrutinized.
Giannoulias earlier this year gave the U.S. attorney's office in Chicago about 100,000 pages of documents he believes shows "serious misconduct" by the hotel's overseers, including possible mail and tax fraud. Burnham has said the alleged misconduct includes questionable accounting practices, inflated salaries and ghost payrolling.
As of Friday, federal prosecutors had filed no charges.
A message left Friday by The Associated Press at the Granite City home of one of the hotel's owners, B.C. Gitcho, was not immediately returned. Efforts to find a telephone listing for Gary Fears, Gitcho's business partner, have been unsuccessful.
Gitcho has denied wrongdoing to the St. Louis Post-Dispatch and said the property was a victim of a sagging hotel market in the early 1980s.
When owners of the Collinsville hotel fell behind on payments, they apparently re-negotiated the deal to include a clause that said if the hotel wasn't profitable, they didn't have to pay the state.
Last year, a Cook County judge declared the loans in default, setting the stage for foreclosure and Giannoulias' plans to sell the property.
When the state began a foreclosure suit at the beginning of the year, a court-appointed management company took over and has reported a profit of more than $500,000 in the first six months of the year. Last year, the hotel had reported losses of nearly $900,000 and $1.3 million in red ink for 2005, Burnham has said.