|By Tom Daykin, Milwaukee Journal
SentinelMcClatchy-Tribune Regional News
Dec. 07, 2011--Work has started on remodeling downtown Milwaukee's historic Loyalty Building into a Hilton Garden Inn after litigation that delayed the project was dismissed.
The 128-room hotel is to open in fall 2012 at the northwest corner of E. Michigan St. and N. Broadway, said Jeffrey Lyon, attorney for building owner First MKD LLC.
First MKD, an affiliate of Rosemont, Ill., hotel operator First Hospitality Group Inc., bought the Loyalty Building and neighboring Mackie Building in March. First Hospitality will use the Mackie Building's Grain Exchange Room as the Hilton Garden Inn's banquet and catering facility.
The project was delayed when two Loyalty Building tenants, Michigan Street Diner and dentist David Paris, refused to accept First MKD's initial offers to buy out their leases.
The dispute took a twist in August when Phoenix-based Sir Mortgage and Finance of Arizona Inc. filed a foreclosure suit against First MKD.
The suit said First MKD defaulted on its short-term loan, which was used to finance the purchase of the Loyalty Building, when it failed to obtain a $10 million construction loan for the Hilton Garden Inn project.
If Sir Mortgage obtained the property through foreclosure, Michigan Street Diner's lease with First MKD would have been terminated.
That would give the new property owner the power to evict the diner without having to pay a cash settlement.
The restaurant in November settled with First MKD and closed. The diner's owner, Gary Kuhn, plans to reopen it at another downtown location next spring. That new location hasn't been announced.
Sir Mortgage's foreclosure suit was dismissed Monday, Lyon said. He said negotiations to buy out Paris' lease are continuing.
But the renovations meanwhile can work around the dental office, Lyon said.
The Hilton project's $18 million to $20 million cost is being financed with a bank loan and federal historic preservation tax credits, as well as equity from the developer.
(c)2011 the Milwaukee Journal Sentinel
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