Chicago developer sues over Jerome ownership

ASPEN, Colo. - Two prominent Chicago developers are engaged in a legal fight over ownership of the Hotel Jerome, with Fred Latsko suing Donald Wilson Jr. and entities that control Aspen’s iconic building.

Latsko’s lawsuit, filed Tuesday in Pitkin County District Court, concerns his role in facilitating the purchase of the historic hotel in 2009 from Lehman Bros., the investment giant that collapsed amid the recession.


Latsko alleges, among other things, that he has never received a “single dollar” from the transaction and new ownership arrangement, and that he had to pay for his own room at the Jerome during its reopening celebration in 2012.


Latsko lost $5 million that he put up in earnest money as part of a deal to buy the hotel in 2008 for $75 million, said his attorney, Matt Ferguson of Aspen, on Wednesday. Latsko allegedly never got that initial investment back.


But when investment bank Bear Stearns, and later Lehman Bros., collapsed, Latsko was unable to secure financing for the deal, the lawsuit says.


In 2009, Latsko approached Lehman Bros. about purchasing the Jerome’s senior mortgage loan for $23 million, Ferguson wrote.


Lehman Bros. agreed, but set the price at $29 million, prompting Latsko to ask Wilson if he’d be willing to fund a portion of the loan purchase.


“He brought the deal” to Wilson, Ferguson said.


Latsko did so, according to the lawsuit, because he and Aspen developer Mark Hunt were involved with Wilson in the acquisition in Chicago of “close to 10 properties before the Hotel Jerome.”


On the Jerome deal, however, Latsko alleges that Wilson attempted to freeze him out of the transactions and entities formed to take over ownership and management.


“This was a real estate deal that hasn’t been closed to my client’s liking,” Ferguson said.


Along with Wilson, one of the defendants in the lawsuit is Jerome Property LLC, which Latsko claims Wilson formed to act as the purchasing entity of the senior mortgage loan on the hotel.


For that arrangement, formed in July 2009, Hunt and Latsko would own 40 percent, and Wilson 60 percent, in Jerome Property LLC, the lawsuit says. The entity acquired the loan and soon foreclosed on it after the previous owner, LCP-Elysian Aspen Owner, allegedly defaulted (LCP-Elysian Aspen Owner fought the allegation but reached a settlement with Jerome Property LLC, according to records in Pitkin County District Court).


A message left with the Aspen attorney Maria Morrow, who represents Jerome Property LLC, was not returned.


In its attempt to stymie the foreclosure, LCP-Elysian Aspen Owner acknowledged in a court filing that “Latsko negotiated Jerome Property’s purchase of the mortgage loan,” Ferguson wrote.


Instead of the $75 million purchase price in 2008, Latsko was now poised to buy the Jerome for $29 million, the lawsuit says.


As such, he spent $50,000 to $100,000 working with designers on renovation plans for the hotel, and also approached former Jerome general manager Tony DiLucia, who agreed to return to that role. DiLucia remains general manager.


But by 2012, Latsko was having trouble even getting a free stay at the Jerome, the lawsuit says, with Latsko telling an ownership official, “I didn’t realize that as an owner I was going to be charged.”


The claims in the lawsuit include breaches of contract and the implied covenant of good faith and fair dealing. Latsko also is seeking a declaratory judgment determining that he owns a 40 percent share “in any and all entities” that own the Hotel Jerome.

 Chad Abraham