Chicago’s second-largest hotel could be getting a new owner after its lender received a foreclosure judgment for a more than $333 million default early in the pandemic, one of the biggest examples of distress in the U.S. hospitality industry during the health crisis.

A Cook County judge last week issued the order against the longtime owner of the Palmer House Hilton hotel, New York-based Thor Equities, according to a court document.

The judgment in favor of Wells Fargo Bank is a key moment in the case, which was one of the biggest foreclosure suits involving hotels nationally during the pandemic and one of the largest loan defaults for any Chicago property in years.

It sets up a potential sale of the 1,641-room hotel in the Loop business district at a time when downtown Chicago hotels are rebounding — but a couple of years before they’re expected to fully recover from the effects of the pandemic. The only hotel in the city with more rooms is the 2,032-room Hyatt Regency Chicago.

Wells Fargo, the trustee for investors in a commercial mortgage-backed securities loan on the sprawling hotel at 17 E. Monroe St., is not saying what will come next.

Wells Fargo could make a credit bid on the property in a sheriff’s foreclosure sale, which would allow the bank to seize ownership and then put it on the market for sale, the proceeds of which would go to pay off — or partially pay off — investors in the securitized debt.

That appears to be the plan, according to a CoStar loan report, which says Wells Fargo is expected to gain control of the hotel in July and sell it by August.

A Wells Fargo spokeswoman and one of the bank’s lawyers, David Neff of Perkins Coie, declined to comment on the judgment. A Thor spokeswoman declined to comment on the Palmer House foreclosure suit.

Business travel and group demand began to show a strong recovery in April, after two poor years of performance, according to a CoStar report on the Chicago hotel market. Those travel segments remain far below pre-pandemic levels, but revenue per available room — a key metric in the industry — is forecast to increase almost 50% over 2021, the report said.

Chicago isn’t expected to return to pre-COVID revenue per available room levels until 2024, and that recovery is “highly dependent on the full return of groups and business travelers,” according to the CoStar analysis.

Thor has owned the hotel since 2005, and over the years it has explored potential sales multiple times before running into the loan trouble a few months into the pandemic.

Thor also has a $94 million loan on the hotel, the value of which is likely wiped out, and a $62 million loan for a retail and parking portion of the building, for which Thor also faces foreclosure, according to Crain’s Chicago Business, which previously reported the foreclosure judgment.

The hotel’s value was appraised at $328 million in March, down from its estimated $560 million value when Thor refinanced the Palmer House in 2018, according to loan reports.

Wells Fargo filed a nearly $338 million foreclosure suit in August 2020, an amount that also included late fees and other costs.

The suit alleged that Thor stopped making monthly loan payments in April 2020, just after the onset of COVID-19. The loan matured in June 2020, giving Thor little chance of replacing the CMBS loan with new debt because the U.S. hotel industry was generating little revenue when much of the economy was shut down.

In another Loop foreclosure suit involving Wells Fargo as lender, the bank last week took ownership of the JW Marriott Chicago hotel with an approximately $251 million auction bid, after previous owner Estein USA defaulted on its loan on the 610-room Chicago hotel.

Thor is a longtime investor in Chicago-area real estate, including several investments in the Fulton Market district. Among those is an office building at 800 W. Fulton where Moline, Illinois-based Deere & Co. plans to open its first Chicago office, with plans to hire 300 tech workers.

The New York firm also is teeing up its first Midwest industrial development northwest of Chicago, in Schaumburg, Illinois.