Falor Loses Control Of Third Chicago Hotel

August 29, 2007

Condominium hotel developer Robert Falor is batting 0 for 3 in Chicago.

After seeing two of his downtown projects wind up in Bankruptcy Court, Mr. Falor has lost control of a third property: the 162-room Hotel Blake in Printers Row. Three years after signing a contract to buy the hotel at 500 S. Dearborn St., Mr. Falor has failed to come up with money to complete the acquisition, according to a recent lawsuit.

When he agreed to buy the former Hyatt for $18.2 million in June 2004, Mr. Falor planned to rename it and convert it into a condo-hotel, selling off its rooms at a profit to individual investors. He even cut a deal to rebrand the property as a Nicky O, a hotel chain launched by Hilton Hotels Corp. heiress Nicky Hilton.

Yet Mr. Falor abandoned the conversion, split with Ms. Hilton and now has little to show for the project except lawsuits from disgruntled investors.

Though many observers, including some of his investors, thought Mr. Falor owned the hotel, he never took title to the property. A Falor-led company, Printers Row LLC, signed a contract to buy the hotel from an affiliate of Marc Realty under an installment sale scheduled to close on July 1, 2006.

But the company admits in a lawsuit that it failed to make the payments necessary to complete the transaction, and the contract lapsed. Printers Row LLC filed the suit to ask a judge to reject a claim on the property by investors who had agreed to buy hotel rooms and sued the developer for abandoning the condo conversion.

“Because the payments under the Contract for Deed were not timely paid and the final closing date has expired, the Contract for Deed has expired, and Printers Row no longer has the right to purchase the Blake Hotel or its property,” says the suit, which was filed last week in Cook County Circuit Court.

Mr. Falor did not return phone calls, and his attorney was unavailable for comment. An executive at Chicago-based Marc Realty declines to comment.

Mr. Falor, one of the most aggressive promoters of condo-hotels in Chicago and Florida, has endured an Icarus-like rise and fall over the past three years. One condo-hotel he planned at 202 S. State St. ended in Bankruptcy Court in 2005, after he sold his stake in the project.

Mr. Falor’s planned condo conversion of the Hotel 71 at 71 E. Wacker Drive also has run into financial trouble. With the project’s mezzanine lender, Oaktree Capital Management LLC, trying to collect $48 million, a company Mr. Falor formed to develop the property filed for Chapter 11 bankruptcy protection in March.

Under a settlement the two sides reached in June, Mr. Falor was removed as manager of the project. The hotel is likely to be sold or refinanced, says Ronald Peterson, an attorney for the development company.