The Marriott Corporation is prepared to withdraw its corporate name from the Pere Marquette Hotel. The company’s reservation system is no longer booking rooms for the downtown Peoria hotel after Jan. 23.
The hotel owner is behind in payments to Marriott and other creditors.
Pere Marquette owner Gary Matthews has missed franchise payments to the Marriott Corporation for several months. He also is not current on his payments to the city of Peoria.
The city loaned Matthews $7 million dollars to renovate the Pere Marquette, of which he still owes $6.7 million. Matthews makes annual payments to Peoria each April. His April 2016 payment was not only a partial one, he now owes $700,000 in accrued interest to the city.
Matthews wants to refinance his debt, asking the city to lower its interest rate and forgive at least part of that $700,000.
In executive session yesterday, the city council gave city manager Patrick Urich permission to negotiate with Matthews. But Urich can't say yet whether the city is willing to forgive all or part of that accrued interest.
“It’s too soon to say whether or not we’d be in a position to do so in a way that doesn’t have any security for us and for the investment the taxpayers have made in this hotel and that the city has made in this hotel,” Urich said.
In addition to the $7 million city loan, a consortium of four banks loaned $33 million to Matthews to help fund the hotel restoration. The banks are secured creditors, meaning they are paid ahead of other creditors.
“The debt that he’s also carrying has very high interest rates. I know that the senior lenders’ interest rate is at 7.5 percent. Our interest rate is at seven percent. That’s above market in terms of what somebody can get today if you refinance," Urich said. "I think if he’s able to successfully refinance, that means he’ll be able to lower that interest rate cost.”
It’s believed Mathews could refinance at a 3.5 to 4 percent interest rate.
In addition to the bank loans, Matthews still owes money to another secured creditor - the Main Street Land Trust. He purchased land from the trust, formed by the late Al Zuccarini, the then owner of Big Al’s. That and other Zuccarini-owned property was needed to build the companion Courtyard Marriott Hotel.
In addition to loans from the land trust, the banks and the city, Matthews received proceeds from a bond issue. The city of Peoria provided $29 million through taxable bonds. While the taxes on the Marriott are designed to pay off those bonds, the city, and consequently taxpayers, are responsible for the bonds if the Pere defaults. So as Urich negotiates, he says he is mindful the city has a total of $36 million invested in the hotel project.
“We’re going to have conversations with Mr. Matthews and his team and obviously we’re going to try to do it in a way that is cognizant of the investment that’s been made by the city and the taxpayers and try to do it in a way that’s as secure for the city as we possibly can,” Urich said.
While the Marriott Corporation has set a deadline of January 23rd on the Pere Marquette, the Courtyard next door will still carry the Marriott brand, at least for a while. It’s also behind in its franchise payments, but Marriott has not yet set a deadline for the Courtyard. Urich also knows he has to keep in mind the value of the Marriott name as he negotiates with Matthews.
“The Marriott name and the Marriott brand is one of the largest business traveler reservation systems in the country," Urich said. "We would hope that it will continue, and we would hope that Mr. Matthews would be working to make that a reality as it goes forward.”
Urich says the Marriott is an active vibrant downtown hotel and it’s essential it stays that way.
While some lenders have come to agreement with Matthews, it is not clear whether all lenders other than the city have reached a refinancing agreement. Urich is hopeful the city and Matthews can agree on a refinancing package before January 23rd, but adds the hotel will stay open, hopefully under the Marriott name, regardless of ownership.