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February 19, 2021 Deal Watch Today

Lender forecloses on Hartford’s Red Lion Hotel; CRDA out $5.2M

CoStar The shuttered Red Lion Hotel in Hartford on Morgan Street.
By Matt Pilon

A private lender that’s owed $26.6 million from the owner of the shuttered Red Lion Hotel in Hartford has officially taken control of the property, according to court records.

On Feb. 10, DW Commercial Finance -- an affiliate of New York-based investment manager DW Partners, which acquired the 50 Morgan St. property through foreclosure in 2019 -- filed a certificate with Hartford City Hall signifying the conclusion of a foreclosure lawsuit initiated back in Aug. 2019.

The certificate, first reported by the Hartford Courant on Thursday, comes after a judge in December approved DW Commercial’s motion for strict foreclosure against Hartford-50 Morgan LLC, another DW Partners affiliate. The property is appraised at $20.2 million.

The Red Lion has been closed since last spring, shortly after COVID-19 reached Connecticut.

Previously containing 350 rooms when it was flagged as a Radisson and a Crowne Plaza, the hotel -- which became a Red Lion in 2018 -- today contains 156 hotel rooms, after the owner converted the top eight floors of the 18-story building into 96 apartments. The $20-plus million conversion project faced delays and didn’t begin leasing until last year, after the pandemic had struck.

The apartments have struggled to draw tenants so far. Approximately one-third of them are currently leased, according to the Capital Region Development Authority, a quasi-public agency that loaned $5.2 million for the $20-million-plus residential conversion several years ago to the original developer, Inner Circle.

“You had a variety of problems here,” CRDA Executive Director Michael Freimuth said Friday. “The building historically unperformed, there were construction problems that delayed delivery of the apartment units, which were then delivered during COVID, which had a double impact. The hotel collapsed and the rent-up of the apartments stalled.”

Photo | HBJ File
Michael Freimuth, a former Stamford economic-development official, is the first and only executive director of the Capital Region Development Authority. He is credited inside and outside the quasi-public agency as the consummate dealmaker.

Despite the Red Lion failure, Freimuth still believes apartment conversions at hotel properties can work well, and that is a trend that might catch on, given that many hotel properties are still struggling financially.

“That is the exit strategy for many hotels right now,” he said of residential conversions. 

With the foreclosure now complete, much of CRDA’s investment in the property could be lost, which would be a first for the quasi-public agency. A year ago or so, the hotel was under a purchase agreement with an unnamed buyer, which would have been a happier outcome for CRDA and other creditors, but the sale never materialized. 

Freimuth said CRDA’s batting average is still good. It has backed the development of several thousand apartment units in Hartford over the past decade, and has never taken a sizable loss until now. 

“People forget that we’re in the risk game,” he said of CRDA’s development mission. “We will take on projects that the private sector may not want to.”
 

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1 Comments

Anonymous
February 20, 2021

The Black Hole that sucks hard earned tax payer monies continues to impart financial damage. We can only hope it will implode.

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