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Thor Equities Refinances Chicago's Landmark Palmer House Hotel for $427.2 Million

New York-Based Real Estate Giant Refinances Property for Third Time in Six Years
July 12, 2018

The Palmer House Hotel in downtown Chicago.

Thor Equities is tapping into rising property values again, refinancing $427.2 million in mortgages on Chicago's landmark Palmer House Hotel as the downtown of the third-largest U.S. city is buoyed by new hotel openings.

The new loan gives New York-based Thor, which sunk $131 million into the trophy hotel in 2008, more breathing room as it buys and sells other properties in downtown Chicago. Thor took out a $333.2 million first mortgage on "the Chicago hotel the world knows best," a nod to the Hilton Hotel’s legendary status in downtown Chicago, and another $94 million in mezzanine debt, according to Cook County property records.

It is the third time in six years that Thor has refinanced the 1,641-key hotel that was a wedding gift from Chicago businessman Potter Palmer to his wife Bertha, a building that had to be rebuilt after the Chicago fire of 1871 right after it first opened and was central to the development of the city's State Street commercial area. The landmark hotel standing now was rebuilt again in 1925 and its Golden Empire Dining Room was once an epicenter for entertainers that included Frank Sinatra, Ella Fitzgerald and Liberace.

JPMorgan Chase was the new lender, replacing financing of $420 million taken out in 2012 with Wells Fargo, the records show. JPMorgan is turning that to the commercial mortgage-backed securities market, according to the records.

Security and Exchange Commission documents note that Thor must make amortization payments equal to 25 percent of the excess cash flow each year, beginning on July 9, 2019, and until the loan term, including extension periods, expires.

Lobby of Palmer House.
Photo Credit: The CoStar Group.

Thor, which bought the 24-story hotel at 17 E. Monroe St. and adjacent 14-story office property at 27-35 E. Monroe in 2005 for $230 million, has wanted to sell the property at least twice. The most recent was in 2015 at an asking price of $575 million, according to published reports.

Thor has sold a handful of retail properties on State Street in recent years as it has invested further west into the Fulton Market district, capped off by the firm's $12.1 million purchase of 800-810 Fulton Market in May. Thor representatives were not available for comment.

New hotel supply is streaming into the market at a fast pace. Last year, five new hotels opened in the central business district and eight were on track for 2018, including the St. Jane Hotel that opened July 2. Choose Chicago, the city’s tourism bureau, expects that downtown hotel rooms will swell by 6.3 percent, or 2,700, by the end of 2019.

Jennifer Waters, Chicago Reporter  CoStar Group   

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