The lender group on the Westin Chicago North Shore has filed to foreclose on the 412-room hotel in northwest suburban Wheeling, five months after the owner stopped making loan payments.

The Westin is straining under an $86-million loan taken out three years ago, when the hotel market was booming and lenders were still shoveling money out the door. But local occupancies and room rates have tumbled since then, and bad loans keep piling up.  Hotel values have plunged, too, meaning the Westin’s lenders could face steep losses. The hotel at 601 N. Milwaukee Ave. was appraised at $110 million in May 2007 but just $51.2 million in March, according to a loan report by Bloomberg L.P.  Local developer Harp Group Inc. built the hotel in 2006 but cashed out most of its stake a year later when it refinanced the property with $15-million investment from New York-based Marathon Asset Management LLC and the $86-million loan from J. P. Morgan Chase & Co.  J. P. Morgan divided the loan into three parts: a $37.1-million senior note that it sold in a commercial mortgage-backed securities (CMBS) offering; a $24.9-million junior note held by Oak Brook-based Inland American Real Estate Trust Inc., and the lowest-ranking $24-million piece owned by Stamford, Conn.-based Five Mile Capital Partners LLC.

If the hotel could be sold for $51.2 million, Marathon and Five Mile would recover none of their investment and Inland American would recover a little more than half of its principal. CMBS investors would get paid back in full.  A Harp executive referred a reporter to a Marathon representative, who did not return calls. A Five Mile executive also did not return phone calls, while an Inland American spokesman referred a reporter to a Chicago-based lawyer representing the lenders, John Weiss of Duane Morris LLP, who declines to comment.  A spokeswoman for the servicer of the loan, Pennsylvania-based Berkadia Commercial Mortgage LLC, also declines to comment.  It’s a familiar story for a growing number of local hotels that loaded up on debt during the boom. New York-based research firm Real Capital Analytics Inc. estimates that $1.4 billion of Chicago hotels are in financial distress, up from $680 million a year ago. Click here for full article from Chicago Real Estate Daily…