Onni’s plans for the seven-story property are unclear and a company spokesperson declined to comment. But in a letter sent today by the Ace Hotel Group to local hotel investors and professionals, the boutique hotel chain said it would no longer operate the property starting Jan. 26.
If the sale were completed at close to $400,000 per room, it would be a significant drop in what Sterling Bay tried to sell before the COVID-19 pandemic, but a relatively high number amid the public health crisis that led to the room being stormed. downtown application. It’s also nearly even with the $64 million debt Sterling Bay took on the property when it refinanced it in 2018, according to documents linked to a recently resolved lawsuit relating to the building.
Stirling Bay originally took a $41.5 million loan on the property in 2016 to redevelop the property, although the total construction cost – which included the expansion of the original building – is unclear.
The deal would map out a new area in Chicago for Onni, which has been among the city’s busiest developers during the pandemic, but has not played out in the local hotel market. The real estate company recently won city approval to develop Halsted Pointe, a massive condominium complex with more than 2,600 units in towers that rise more than 50 stories at the southern end of Goose Island.
Onni also developed a $154 million renovation of the historic 853,000-square-foot building at 225 W. Randolph St. , a bold bet on a rebound in the pandemic-causing Loop office market.
Ace’s pending purchase would be its own bold bet on the post-COVID recovery for downtown hotels. But it’s also a bet on the momentum of the Fulton market, which has boomed in the face of the crisis with a large number of companies continuing to rent offices in the neighborhood. Sterling Bay is now under construction with a 200,000-square-foot office building just north of the Ace at 345 N. Morgan St. , where supply chain management company Havi Group recently signed a deal for about half of the building, where it will relocate its headquarters from suburban Downers Grove.
Ace is also across the street from Google’s Midwest headquarters, which led to its development in the first place. Part of Sterling Bay’s deal with Google to convert the former cold storage facility into its head office in Chicago was that the developer would build a hotel across the street to cater to Google’s visitors. That Ace was born, redeveloped from a two-story industrial building that Sterling Bay purchased for $4 million in 2013, according to Cook County property records.
The Sterling Bay hotel was put up for sale in 2019 and is said to be seeking $100 million for the property, making it the second most expensive hotel ever sold in Chicago on a per-room basis, according to research firm Real. Capital Analytics.
But the drug was never traded, and the pandemic increased its value in a way that has lingered over the past 20 months. Revenue per available room at downtown hotels in October was just 60% of the average in October 2019, according to STR Hospitality Data and Analytics.
However, Ace’s pending sale price will be among the highest total room rates paid for a downtown Chicago hotel since the start of the pandemic. In two of Chicago’s most expensive hotel deals during the crisis, the Thompson Chicago and Talbott Hotel on the Gold Coast sold for nearly $300,000 a room.
A spokeswoman for Sterling Bay declined to comment.
With the local hospitality market reeling, the developer recently attempted to unload Chicago hotels. The developer led a project that suffered a major loss when it recently sold the 16-story Talbott Hotel. She’s hoping for a more profitable outcome in the 200-room Hyatt House hotel, which opened in the West Loop in 2019, and which went up for sale in October.
Meanwhile, Sterling Bay is building a new mixed-use tower at 300 N. Michigan Ave. , which will include the 280-room CitizenM hotel.
Sterling Bay may have wanted to offload Ace sooner, but last year the hotel was at the center of a legal battle between the developer and lenders over the property. The dispute included moving the unused development rights on Ace to a property corner of the hotel, where Sterling Bay planned to develop a new office building for Google that had been put on hold with the onset of the pandemic.
Sterling Bay and lenders confirmed that they resolved the matter earlier this year, potentially clearing the way for the hotel to be sold.