Partnership Change Reignites Hotel Project
- Jan 04, 2011
January 4, 2011
By Barbra Murray, Contributing Editor
Plans to transform a 375,000-square-foot portion of the nearly 1.5 million-square-foot former IBM Building at 330 N. Wabash Avenue in downtown Chicago into a five-star hotel are on again now that Langham Hotels & Resorts has joined forces with Oxford Capital Group L.L.C. LaSalle Hotel Properties, Oxford’s partner in the Modern Magic Hotel L.L.C. joint venture that had purchased the 12 floors of space from Prime Group Realty Trust for $46 million in 2008, just sold its 95 percent stake in the partnership for $58.8 million.
The sale of its interest in the Modern Magic joint venture leaves no profit for LaSalle, which, with net proceeds of $51.6 million, expects to incur an impairment loss of approximately $8 million. For Langham’s part, the decision to team with Oxford on the project paves the way for the international hotel company to debut its third U.S. property to carry the 145-year-old Langham flag.
With 330 luxury guestrooms, some as large as 2,000 square feet, the Langham Chicago Hotel will span floors 2 through 13 of the 1971 Mies van der Rohe-designed skyscraper, as well as a segment of the first floor and riverfront plaza. The upper upscale lodging destination will also offer 20,000 square feet of meeting space and a premier 9,000 square-foot restaurant. When Oxford and former partner LaSalle conceived the plan in 2008, it carried a development price tag of approximately $180 million, as noted on the website of Prime Group, which still owns the 1.1 million square feet of Class A office space in the 52-story tower–the largest and last North American building designed by the acclaimed van der Rohe.
Prime Group president & CEO Jeff Patterson said that during the past several years, the company has been dedicated to repositioning the property into a modern mixed-use property.
The Oxford-LaSalle team had temporarily suspended the hotel development plan in hopes of resuming it when, as noted in LaSalle’s third quarter 2010 earnings report, “economic conditions and lodging industry fundamentals demonstrate sustained improvement.” LaSalle is no longer onboard the project, but Oxford and Langham have apparently determined that economic and lodging industry conditions are currently conducive to moving forward with the Langham Chicago Hotel.
Nationally, the hospitality market is in recovery mode, and Chicago is no exception. “A macroeconomic recovery in Chicago, which started in 2010, is expected to lead to continued growth in hotel demand for 2011, 2012, and 2013 that exceeds supply growth,” as per a recent report by hotel industry intelligence and data provider HVS Global Hospitality Services. “Overall, hotel performance is likely to continue to improve year-over-year in the near-term.”
Development of the Langham Chicago Hotel is scheduled to reach completion in 2012, at which point approximately 500 permanent jobs will materialize.