OUTLINE WAY TO REFINANCE DRAKE HOTEL
By: Al Chase May 21, 1932
Avoid Foreclosure and Receiver
(Chicago Tribune) - Notices were mailed last night to the 496 stockholders of the Whitestone Company, which owns the Drake Hotel, outlining a refinancing plan for that well known property whereby both receivership and foreclosure will be avoided if the owners of the hotel stock ratify the proposal. The Drake Hotel then will be taken by a new corporation to be organized and owned by the National Realty and Investment Company which has as its directors, Arthur Cutten, Vincent Bendix, Warren Wright, Silas H. Strawn, Donald R. McLennan, Warren B. Ewer, Charles S. Pearce, Benjamin Marshall, and Edwin L. Brashears.
In his report to the stockholders, Mr. Marshall, president of the Whitestone Company, states that the Drake Hotel had a net loss of approximately $190,000 in 1931 and was unable to make the interest and sinking fund payments due on its $3,440,000 first mortgage, held by the Metropolitan Life Insurance Company, on Nov. 1, 1931, and May 1, 1932. These arrears amount to $270,000. He states that “the company is therefore in default under the mortgage and foreclosure is imminent”. In addition, the company owes approximately $600,000, principally for back taxes.
Risk Company to Cooperate.
Through assured cooperation of the Metropolitan Life Insurance Company with the refinancing plan evolved, however, Mr. Marshall states that if the stockholders o.k. the proposed setup neither foreclosure nor receivership will be necessary and the Drake Hotel can be put back on its financial feet.
Briefly the refinancing plan is as follows: The National Realty and Investment Company is to organize a new corporation with an authorized capital of 50,000 shares of 5 percent noncumulative class A common stock of $25 par and 30,000 shares of class B common stock of $5 par. Then all of the assets of the Whitestone Company will be conveyed to this new corporation, in consideration for which the new company will issue to the Whitestone Company 40,000 shares of the A stock and 10,000 shares of the B, to be distributed by its prorate to preferred stockholders. At the same time the National Realty and Investment Company will purchase from the new corporation at par the remaining 20,000 shares of the class B.
The new corporation will undertake to procure an extension of the principal prepayments and interest now in default and will assume and agree to pay all of the then outstanding first mortgage obligations with the exception of some dividend scrip issued in 1923.
Cancel Drakes’ Contract.
As a consideration for canceling a contract with Tracy C. Drake and John B. Drake, the refinancing plan calls for a cash payment to them of $50,000, 4,000 shares of class A stock, and an additional $50,000 over a three year period out of 25 percent of the net earnings of the company. In addition, they both will be employed by the new company.
The National Realty and Investment Company will supply funds to the new corporation, secured by a three year second mortgage at 6 percent and a chattel mortgage on the furniture and furnishings. The hotel company board of directors unanimously approved the proposal of the National Company at a meeting held on Thursday. A special meeting of the hotel stockholders has been set for June 20. If the plan is approved it will then be operative.
The Drake, at Michigan Avenue and Lake Shore Drive, was built in 1921 from plans by Marshall & Fox, at a cost of approximately $8,000,000 for land, building, and furnishings. It contains 780 rooms. The new interests, it is stated, will do considerable remodeling, cutting down the large lobbies and catering more than ever to permanent rather than transient guests.
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