T
he Shidler Group is facing another foreclosure challenge, but this one stands out in the complex world of non-judicial foreclosures. A mysterious lender, ACF L5-M, has launched an auction against interests in a hotel portfolio tied to Shidler, which includes nearly 20 hotels across the US. What's unusual about this foreclosure is that it targets "purchase options" rather than direct ownership of the properties.

    The sale notice suggests that bidders can acquire rights to buy individual hotels from the Shidler portfolio, with an auction set for November 6. This type of U.C.C. foreclosure allows lenders to sidestep traditional court proceedings, which can take years. Instead, they pursue interests in companies controlling the properties, often on the courthouse steps.

    Shidler Group, led by Jay Shidler, specializes in ground leases and purchased land beneath the hotels in 2015. It appears that four entities tied to the company pledged options to acquire the hotels as collateral to the lender. On November 6, a new bidder can acquire those options at auction.

    This foreclosure is another example of "foreclosure engineering," where lenders use creative workarounds to avoid lengthy court battles. Shidler Group has faced financial distress in various locations, including a recent default on a $204 million CMBS loan tied to 22 properties and a pending foreclosure by Wells Fargo over an affiliate's failure to make payments on a Chicago office building.