Hotel Jerome owners accuse lenders of an ‘improper play’
November 10, 2009
ASPEN – The owners of Aspen’s Hotel Jerome took legal steps this week to avoid foreclosure and accused a Chicago developer of making an “improper play” on the Main Street landmark.
The 12-page filing was made by LCP-Elysian Aspen Owner LLC, which bought the 93-bedroom Main Street hotel for $52.2 million in May 2007. It comes after Jerome Property LLC, which holds the note on the property, began foreclosure efforts in September, claiming the owners have owed $36.3 million on the property since the entire loan became due in June.
Both parties are based in Chicago.
The Pitkin County Treasurer’s Office scheduled the foreclosure auction sale for Jan. 27. The treasurer’s office, however, needs court approval to hold the auction; on Oct. 23, Jerome Property LLC filed a court motion seeking permission to sell the hotel.
LCP-Elysian’s response to the motion, filed Monday, maintains it is “current on all payments under the loan.”
While the response claims that Chicago developer Fred Latsko negotiated the purchase of the loan – on behalf of Jerome Property – on Aug. 31 from Lehman Brothers, it also takes aim at his credibility by bringing up a 1985 conviction and most recently, his alleged use of private financial information to squeeze out the current Jerome owners.
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Latsko, the response says, “is facing two multi-million foreclosure suits of his own in Illinois. He also bears other dubious distinctions. As a Chicago real estate developer, he was convicted for deception and forgery in 1985. He was granted a pardon, and his criminal record was expunged by former Illinois governor Rod Blagojevich in one of his last official acts as governor on the day he was impeached after being indicted on federal corruption charges.”
Additionally, the motion claims that Latsko was under contract to buy the Hotel Jerome for $75 million last year. During that period, LCP-Elysian provided Latsko and his firm, L.I. Acquisitions LLC, confidential documents – chiefly loan papers and operating information – related to the Hotel Jerome.
“Mr. Latsko, however, used the confidential information … to negotiate the purchase [of] the loan … for less than half of the $75 million he had contracted to pay for the Hotel,” LCP-Elysian’s response says.
Latsko could not be reached for immediate comment Tuesday.
The response also alleges that in May, LCP-Elysian took the “necessary steps to exercise its right to extend the maturity date of the mortgage note until June 2010.” But Lehman Brothers Bank, which held the note before Jerome Property LLC bought it, claimed the extension notice was “non-compliant” and demanded that LCP-Elysian pay the entire loan balance immediately, the response says.
Also caught up in legal wrangling is Brickman Aspen LLC, which held a mezzanine loan to LCP-Elysian. Both Brickman, which LCP-Elysian accuses of making a play on the hotel because it is “racing to foreclose on its collateral,” and Jerome Property are being sued in a New York court. There, the Hotel Jerome owners allege the lenders “improperly had thwarted the exercise of their extension options under the mortgage and mezzanine loans, in breach of the duty of good faith and fair dealing,” the response says.
According to the response, the New York court “properly has determined that there is a substantial likelihood that the borrowers have properly extended the maturity date of the identical mortgage and mezzanine loans until June 9, 2010.”