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State acquires Springfield hotel, plans sale within 6 months

<p style="margin: 0in 0in 0pt;" class="BODY">Illinois got into the hotel business Tuesday and hopes to be out of it again in six months.

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<p style="margin: 0in 0in 0pt;" class="BODY">Treasurer Alexi Giannoulias' office took title to the President Abraham Lincoln Hotel & Conference Center in Springfield after a judicial sale at the Sangamon County Complex.

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<p style="margin: 0in 0in 0pt;" class="BODY">The office will now start the process of marketing the hotel nationally, with the aim of selling it by summer's end. The intent is to eventually recover some of the $30 million in principal and interest owed to the state by the hotel's previous owners.

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<p style="margin: 0in 0in 0pt;" class="BODY">"Today's legal proceedings represent a fresh start for a hotel that certainly deserved better and now will get better," Giannoulias said at a Statehouse news conference. "Better owners will put money back into the hotel instead of their own pockets. Better owners will maintain and improve the property."

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<p style="margin: 0in 0in 0pt;" class="BODY">Giannoulias said his office is "pretty close" to hiring an auctioneer who will oversee marketing the property. The state hopes to entice bids by national hotel chains.

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<p style="margin: 0in 0in 0pt;" class="BODY">As part of the sales process, Giannoulias said a formal appraisal may be obtained.

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<p style="margin: 0in 0in 0pt;" class="BODY">The Sangamon County supervisor of assessments office said that as of January 2007, the hotel had an assessed value of about $2.5 million for property tax purposes. That would put the hotel's fair market value at over $7.5 million.

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<p style="margin: 0in 0in 0pt;" class="BODY">Potential bidders will have to go through a pre-qualification process.

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<p style="margin: 0in 0in 0pt;" class="BODY">Giannoulias also said his office does not want the original owners coming back and trying to repurchase the hotel in six months.

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<p style="margin: 0in 0in 0pt;" class="BODY">"We determine if we want certain people to bid on the property or not," he said. "I don't think they would be the ideal owners, based on their track record of letting the hotel get where it is."

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<p style="margin: 0in 0in 0pt;" class="BODY">There were more than 80 investors in the hotel at one time, with one of the principals being Springfield Republican leader William Cellini.

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<p style="margin: 0in 0in 0pt;" class="BODY">Giannoulias would not say the state would bar all of the original investors from bidding on the hotel.

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<p style="margin: 0in 0in 0pt;" class="BODY">"I just think it would be highly unlikely," he said.

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<p style="margin: 0in 0in 0pt;" class="BODY">Paul Miller, general counsel for the treasurer's office, said full disclosure of financial and ownership interests will be required of any group making a bid.

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<p style="margin: 0in 0in 0pt;" class="BODY">"As long as it is handled in full compliance with state and federal law, meaning it is not discriminatory, the (state) can sell it to whomever (we) deem is the most responsible purchaser," Miller said.

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<p style="margin: 0in 0in 0pt;" class="BODY">The state also will be making decisions soon about putting money into hotel improvements. If the cost can be recovered at the sale, improvements will be undertaken. However, if a national chain wants to bring its own decor to the property, changes may not be worth making, Giannoulias said.

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<p style="margin: 0in 0in 0pt;" class="BODY">"I can't imagine any drastic, expensive improvements," he said.

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<p style="margin: 0in 0in 0pt;" class="BODY">In the first 10 months since a court-appointed receiver took over operations of the hotel, it has recorded a net profit of 1.3 million, according to the treasurer's office.

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<p style="margin: 0in 0in 0pt;" class="BODY">During the same period a year earlier, under the previous owners, the hotel made just $238,000.

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<p style="margin: 0in 0in 0pt;" class="BODY">The state offered $100,000 for the hotel during Tuesday's sale, although it is only a paper transaction and no money changed hands.

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<p style="margin: 0in 0in 0pt;" class="BODY">The only drama occurred when Laurie Judd, an attorney representing the state's interests, made an initial bid of $1. Stephen Tagge, representing the former owners, countered with a bid of $2.

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<p style="margin: 0in 0in 0pt;" class="BODY">Judd upped the bidding to $3, prompting Tagge to offer $50. Judd then bid $100,000, and the deal was final.

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<p style="margin: 0in 0in 0pt;" class="BODY">Doug Finke can be reached at (217) 788-1527.

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<p style="margin: 0in 0in 0pt;" class="BODY">Facts box

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<p style="margin: 0in 0in 0pt;" class="BODY">The President Abraham Lincoln Hotel & Conference Center, 701 E. Adams St., was built with the help of a $15.5 million state-backed loan issued in 1983. More than 80 individual investors also put money into the hotel, including influential Republican Bill Cellini of Springfield.

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<p style="margin: 0in 0in 0pt;" class="BODY">The loan was restructured twice, the last time in 1990. But the hotel made only two payments on the loan in the last 10 years and none in the last five years.

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<p style="margin: 0in 0in 0pt;" class="BODY">A Cook County judge declared the loan in default in 2006, and a receiver was appointed in March 2007. The state of Illinois took possession Tuesday.

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<p style="margin: 0in 0in 0pt;" class="BODY">The hotel, now operated by a contracted management company, has about 315 rooms. Average room rate is $115 per night, according to tripadvisor.com.