The long-troubled hotel at 201 East Delaware Place in Streeterville has officially landed in the hands of its lender, Churchill Real Estate, after Boca Raton-based Pebb Capital agreed to surrender the 18-story building in the face of a $28 million foreclosure. The transfer effectively shuts the door on Pebb’s drawn-out plan to turn the former Raffaello, most recently operated as the Gale Chicago, into a hybrid of apartments and a smaller hotel. Neighbors and prospective tenants are now dealing with a new owner and a murky timeline for whether the property will be reworked, sold or simply held as an investment.
According to The Real Deal, Churchill MRA Funding I, LLC, acting as successor in interest to Pebbmax Lending Co., kicked off foreclosure proceedings and ultimately reached a stipulation in which the borrower consented to hand over the property. As part of the agreed judgment, the lender waived its right to pursue a personal deficiency judgment against parent guarantor Pebb Capital Management, LLC. Court filings show the Pebb borrowing entity admitted it had stopped paying debt service and property taxes by August 2025, after signing multiple loan modifications with Churchill between 2024 and 2025.
Pebb’s conversion plan, and how it unraveled
Back in December 2023, Pebb filed a rezoning application that sketched out an ambitious retrofit of the 170-room hotel into 140 apartments, while retaining about 56 hotel keys and ground-floor commercial space, according to Urbanize Chicago. Design documents showed a corner lobby, a restaurant fronting Delaware Place and zero on-site parking, with the project instead leaning on 140 bicycle stalls.
On paper, it was a classic downtown repositioning play. In reality, the plan never made it to the finish line. The rezoning push did not yield final city approvals or a construction start before the property’s finances worsened and the foreclosure machinery started up.
Longstanding ownership headaches
The current drama is only the latest chapter in a messy ownership history. In 2019, Miami-based Maxwelle Real Estate bought a bulk stake of roughly 140 rooms and took out about a $29.3 million mortgage, which triggered a chain of loan transfers and debt workarounds. A Pebb affiliate picked up that note in 2022, and Pebb later turned to Churchill for financing to support the planned conversion.
The property still carries baggage from its condo-hotel days, including prior disputes over investor buybacks and management arrangements. The Real Deal has documented those earlier sales and financing maneuvers that set the stage for the current takeover.
What could change under new ownership
Now that Churchill controls an out-of-operation hotel at a prime Streeterville address, the property’s next act is wide open. The lender could try to carry Pebb’s conversion playbook across the goal line, shop the asset to a new developer or simply sit tight and wait for downtown multifamily fundamentals to improve.
Public records so far do not spell out how much Churchill ultimately advanced to Pebb for the attempted conversion, nor do they reveal any specific timetable for a redevelopment or sale. For now, anyone trying to read the tea leaves will have to watch Cook County court dockets and City of Chicago permit filings. The building still appears on Pebb Capital’s portfolio pages as 201 East Delaware, a reminder of the firm’s recent ownership and planning work even as control shifts to the lender.
Legal notes
The foreclosure wrapped up through a stipulated judgment in which the borrower consented to the foreclosure and surrendered the asset to the lender. Lenders often favor that kind of deal to avoid drawn-out sheriff’s sales and follow-on litigation over deficiencies.
Because Churchill waived the right to pursue a personal deficiency judgment against the parent guarantor, the loss is effectively confined to the property rather than the principals behind it, which limits the borrower’s personal exposure. Market watchers and nearby residents will want to keep an eye on Cook County court records and City of Chicago zoning and building permits for any sign of a sale, transfer or new entitlement activity that could hint at the building’s next chapter.
