The lender behind the largest hotel in the Twin Cities, the Hilton Minneapolis, has set a date to begin the foreclosure process for the property.
The lender plans to begin foreclosure proceedings on Oct. 11 “after failed modification discussions,” according to a financial filing. Fernandina Beach, Fla.-based Haberhill owns the 821-room Hilton in partnership with Chicago-based Walton Street Capital LLC.
The financial filing connected to the property’s commercial mortgage-backed securities detailed the pending foreclosure proceedings. The Business Journal accessed the filing through a Bloomberg Terminal.
The CMBS loan’s special servicer, Atlanta-based Trimont Real Estate Advisors, scheduled the foreclosure proceeding date, according to the filing. Trimont declined to comment on the proceeding.
Douglas Greene, Haberhill’s managing director, said foreclosure is not a likely outcome. Haberhill hasn’t received notice of a foreclosure, which is a required step in the foreclosure process, Greene said in an interview on Monday.
In Hennepin County, property occupants are supposed to receive a notice of foreclosure at least four weeks before a scheduled foreclosure-sale date. A notice of sale must also be published in a qualified newspaper once a week for six weeks before the scheduled sale date, according to the county. No such notice has been posted, according to a public notice aggregation website run by the Minnesota Newspaper Association. This puts the earliest potential sale date in November.
Greene declined to answer further questions from the Business Journal.
Walton Street didn’t reply to a request for comment.
The 25-story hotel is located on the west side of downtown Minneapolis at 1001 Marquette Ave. It was constructed in the early 1990s and renovated in 2017. The building has several ballrooms and a restaurant, Ten 01 Social.
The Hilton’s 821 rooms make it the largest hotel by room count in the Twin Cities, according to Business Journal research. This year, the hotel property will pay nearly $3 million in property taxes, according to Hennepin County property records.
Like many hotels in the metro, its appraised property value plummeted during the pandemic, falling from nearly $239 million in 2018 to around $173 million in October 2021, according to financial filings.
The fall in property value is no surprise, since the pandemic halted travel for months, including meetings and events at the nearby Minneapolis Convention Center. The travel shutdown slashed hotel occupancy rates nationwide and, as a result, revenue and jobs in the hospitality industry. The impact was especially felt in downtown Minneapolis, where at least one hotel closed while others were sold for a deep discount.
The Hilton’s owners, an LLC affiliated with Haberhill and Walton Street, was determined to be in official monetary default, or passed due on its primary mortgage, in April 2020, according to loan servicer notes. As of Sept. 15, they owed at least $180 million in mortgage debt on the property, which is less than what the property was worth when it was last appraised in October 2021, according to the financial filings.
In March, Greene, of Haberhill, told the Business Journal the Hilton wasn’t the only downtown hotel that faced a difficult past two years. “No hotels are doing well. We’re all struggling. In my opinion, [it’s] largely because of the way Minnesota handled the pandemic,” Greene told the Business Journal. “… The shutdowns and allowing crime to spike downtown, … it’s all related.”
Haberhill and Walton Street acquired the Hilton in 2016 for $143 million. The seller at the time was Bethesda, Md.-based DiamondRock Hospitality Co.
Haberhill also jointly owns the Hyatt Regency on Nicollet Mall in downtown Minneapolis with Starwood Capital Group.
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