W Chicago Hotel Trades for $128.8M
- May 12, 2011
May 11, 2011
By Barbra Murray, Contributing Editor
Ten years after making its debut, W Chicago City Center has come under new ownership. Starwood Hotels & Resorts Worldwide Inc. sold the 368-room hotel to Chesapeake Lodging Trust in a transaction valued at
W Chicago’s downtown address at 172 W. Adams St. places it right in the middle of the Windy City’s financial district. Back in 1998, Starwood acquired the 22-story building, known as the Midland Hotel at the time, and by 2001, the company had transformed the historic property into the full-service, luxury lodging destination it is today. Originally built in 1928, the building’s walls also envelope 12,000 square feet of meeting and event space, a fitness facility and a newly updated restaurant.
The last 12 months have been good to W Chicago. At the close of April 2011, the recently renovated hotel had experienced a year-over-year increase in RevPAR of 19.5 percent. Things are looking up for Chicago’s hotel market in general. “Until 2013, growth in demand is projected to outpace growth in supply,” hotel consulting firm HVS Global Hospitality Services notes in a forecast. “As a result, occupancies are expected to increase in the near-term. As occupancies recover, ADR growth should follow. By year-end 2013, ADR is projected to be slightly above the previous nominal peak level achieved in 2008, and a market-wide occupancy of 65.6 percent is projected to be slightly below 2007’s peak occupancy of 67.5 percent.”
Starwood’s disposition of W Chicago takes the company one step closer to achieving its goal of transforming into what Frits van Paasschen, President and CEO of Starwood, describes as “an ‘asset light’ hospitality company.” Starwood will stay onboard to oversee the property as a W-brand hotel under a 40-year management agreement featuring full extensions. For Chesapeake, which relied on proceeds from its March equity offering and a borrowing under its $150 million secured revolving credit facility to facilitate the purchase, W Chicago marks the lodging REIT’s seventh acquisition since its January 2010 IPO, and its entry into the Midwest market.