Chicago Hotel Pitched as Redevelopment Play
A massive Chicago hotel suitable for redevelopment is up for grabs.
The 871-room Congress Plaza Hotel & Convention Center, at 520 South Michigan Avenue, could attract bids of about $300 million, or $345,000/room. Carlton Group of New York and local broker Vandon Forbes are jointly representing the seller, a group led by investor Albert Nasser.
A trade at the estimated value would be the second-highest price ever paid for a Chicago hotel, after last year’s $315 million sale of the master lease on the 452-room LondonHouse to Union Investment of Germany.
Congress Plaza nearly traded in 2012, when a partnership between Aimcap and Halycon Development, both of New York, agreed to pay $275 million, planning to convert a portion of the roughly 1 million-square-foot property into residential condos and to increase the amount of retail space. While that deal fell through, the Nasser partnership is still highlighting the potential to redevelop the structure into a mix of hotel, residential and retail space.
The 11-story Congress Plaza encompasses two squat towers — which were originally separate buildings — connected by a low-rise structure. Many rooms have views of nearby Lake Michigan, a potential plus for a conversion to rentals or condos. While the full-service hotel already has two restaurants, the rooftop is approved for an additional venue that could be used as a high-end space with lake views.
The property, which competes against upscale hotels, is unencumbered by management or brand contracts, giving a buyer flexibility to make immediate changes. Rooms could be repositioned to compete against higher-end hotels. An alternative is a “dual-brand” strategy, which would entail dividing the property into two flags that would have the same operator but would target different market segments.
Financial information for the hotel was unavailable, but its performance is believed to have been hampered by the absence of a flag and the impact of a long strike that ended a few years ago. The property includes some 50,000 square feet of meeting space.
Chicago hotels had a 65.6% average occupancy rate in the first half, roughly flat with a year earlier, according to STR. The average room rate inched up 1.5%, to $139.56, which increased revenue per room 1%, to $91.53.
Congress Plaza stretches from East Harrison Street to East Congress Parkway, adjacent to Grant Park and near Lake Shore Drive.
The north tower opened in 1893 to house visitors to Chicago’s World Fair. The south tower was added in 1907. For a time during World War II, the property was owned by the federal government and used as a headquarters for U.S. Army officers.
The property’s name and ownership changed several times before the Nasser partnership bought it in 1987. More recently, the property was known for a 10-year strike by Unite Here Local 1. The union walked out in 2003 over a wage dispute and returned in 2013.