Deal Struck for Downtown Chicago Hotel
A joint venture has agreed to pay $275 million for the Congress Plaza Hotel in Chicago with an eye towards redeveloping the massive 871-room property.
If completed, the off-market deal will rank as the largest Chicago hotel sale since 2006. The buyer is a partnership between AIMCAP, led by investor David Aim, and Halcyon Development of New York. The team’s aim is to boost revenues at the aging hotel over the next year or two, then redevelop the 1 million-square-foot complex and convert portions into residential condominiums and retail space.
BGC Capital Real Estate Capital Markets, an affiliate of Cantor Fitzgerald, has been tapped to line up $225 million of acquisition financing.
The seller, investor Albert Nasser Shayo, has owned the property since 1987. The hotel is the subject of a nearly decade-long strike. Workers represented by Unite Here Local 1 walked out in 2003 in a wage dispute that remains unsettled. Financial information for Congress Plaza was unavailable, but the strike appears to have taken a toll on its performance.
The property competes with upscale hotels in the Chicago market, which had an average occupancy of 73.3% during the first 10 months of the year, up from 69.9% during the same period the year before, according to Smith Travel Research. The average rate jumped almost 8% to $124.85/room, increasing revenue per room by 13.1%.
Congress Plaza, across from Grant Park on South Michigan Avenue, has a storied past. The north tower opened in 1893 to house visitors to the World’s Columbian Exhibition. The south tower was added in 1907. Over the years there were multiple changes in the hotel’s name and ownership. For a time during World War II, the hotel was owned by the federal government and used as a headquarters for U.S. Army officers.
The tentative deal would be the second recent high-profile acquisition for New York-based AIMCAP. Last week the firm announced it was buying the Atlantic Hotel & Spa in Fort Lauderdale, Fla., in a joint venture with Ascend Group, a firm led by New York developer Robert Kaliner. Pricing for the approximately 124-unit full-service hotel is unknown.
Another firm founded by Aim, Euro Fund Properties, has been involved in commercial real estate deals across Europe and development projects in Florida, Spain and Morocco. Halcyon Development is a newly formed affiliate of an entertainment media firm, Halcyon Co., headed by Derek Anderson and Victor Kubicek.