|By Adam Jadhav, St. Louis
Post-DispatchMcClatchy-Tribune Regional News
July 4, 2008 --By Adam Jadhav
ST. LOUIS POST-DISPATCH
Illinois Treasurer Alexi Giannoulias announced Thursday that the state will sell the Holiday Inn in Collinsville for $5.3 million, a fraction of the debt owed on the beleaguered property.
"I don't think anyone is going to be pleased after seeing what's gone on with this hotel for so long," Giannoulias said. "It's a disgusting chapter in Illinois politics."
The hotel debacle stems from $13 million in loans made to politically connected developers in 1982. Developers Gary Fears and B.C. Gitcho almost immediately fell into worse debt and were given sweetheart refinancing packages.
The developers repeatedly claimed financial hardship, and the debt ballooned to more than $32 million. Giannoulias has alleged that poor management if not outright theft contributed to the property's failure, and has turned over tens of thousands of documents to federal prosecutors.
The state has turned about $1.1 million in profits since it took control of the property. Legal action remains pending to collect as much as $4 million in outstanding credit and personal judgments against Fears and Gitcho.
But the sale, profits and potential collections would still only add up to $10.4 million. Giannoulias was gruff Thursday, saying he was not particularly enthused that the state will lose so much money.
"Yeah, I'm happy that we're getting something back, but they owed 32 million and we're getting back 10.4 million. You get what I'm saying."
Fears, formerly of Collinsville, and Gitcho of Granite City could not be reached. Don Smith, an attorney representing Gitcho, declined to comment.
Lodging Hospitality Management of St. Louis submitted the highest bid. The company plans to make more than $9 million in investments and will likely change the franchise to a more upscale hotel.
The company has a track record of revamping properties. St. Louis area residents can see their work with the new downtown Hilton as well as the rebuilt Doubletree in Westport Plaza. At the Holiday Inn, a completely new interior and exterior are planned.
"We buy hotels that are distressed and reposition them through renovations and potential flag changes," said Craig Cobler, senior vice president of development of the company. "This is ripe for a turnaround."
State and local officials have said the property should have been a success from the start, positioned in a prime development area and next door to one of the region's largest convention centers -- the Gateway Center.
Local officials said Thursday they were excited about the new owners; the city of Collinsville is considering an incentive package that could include access to funds from the tax increment financing district already surrounding the hotel.
"It's a relief to have that quality of a hotelier in the area after so many years of mismanagement and misdirection," said Paul Mann, the city's community development director.
The loans that gave birth to the hotel were part of a statewide development program spearheaded by then-Gov. Jim Thompson, a Republican, and state Treasurer Jerome Cosentino, a Democrat. A number of hotel projects were created and most succeeded.
However, the Collinsville property, as well as a hotel in Springfield also built by politically connected developers, floundered. Both have been a political nightmare for officials since.
In the 1990s, state treasurer Judy Baar Topinka, a Republican, tried to clear the debt by selling the property at a bargain price, but the deal was nixed amid political infighting.
After taking office in 2007, Giannoulias almost immediately moved to foreclose.
Giannoulias has also gone to court to take the Springfield property, President Abraham Lincoln Hotel. He hopes to sell it at an auction later this year.
Giannoulias said he is happy to have the Collinsville property off the state's books, but he remains disappointed that the state has gotten such a raw deal. As for any political flak he might face, he said he doesn't care.
"You're talking about 20-plus years of neglect and abuse and political corruption," Giannoulias said. "If (the sale) hurts my political career, so be it."
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