Investors cashed in on Chicago’s hotel industry in 2018, with $200 million spent on the five priciest hotel acquisitions of the year.
Despite a workers’ strike that saw picket lines outside 25 Downtown hotels this fall, the third quarter of 2018 was one of the strongest quarters for the hotel market in years. Occupancy rates also rose by 10 basis points in 2018, reversing a two-year slip. More than 4,500 hotel rooms were under construction this summer in an effort to keep up with demand.
The year saw a number of high-profile hotel acquisitions, including the most expensive hotel deal in the O’Hare submarket in two years. Of the five priciest hotel deals, three were in the suburbs: the Rosemont Hilton, an Embassy Suites in Schaumburg and a Holiday Inn in Tinley Park.
The remaining deals were for hotels off of the Magnificent Mile in Chicago: the James Chicago hotel and the Hampton Inn and Homewood Suites.
1. The James Chicago | $83 million
In June, Junius Real Estate Partners bought the James Chicago hotel in Streeterville for $83 million. Selling the 297-key hotel was Denihan Hospitality, which took a significant loss after buying the property a decade ago for $136.6 million. Denihan had $82 million in debt on the building after net operating income fell by 35 percent between 2014 and 2016, reports said at the time. The James Chicago closed Dec. 3, but is expected to reopen next year after a rebranding, according to reports.
2. Rosemont Hilton | $36.9 million
Hong Kong-based investors Junson Capital in March paid nearly $37 million for the Rosemont Hilton, making it the most expensive hotel deal in the O’Hare submarket since 2016, when the Westin O’Hare traded for $82 million. Asset manager Barings sold the hotel as part of a $650 million portfolio sale that included office, hotel, industrial and multifamily properties throughout the suburbs.
3. Hampton Inn and Homewood Suites | $36 million
Chicago-based Arbor Lodging Partners picked up this Magnificent Mile hotel that contains a combination Hampton Inn/Homewood Suites. Arbor has plans for a $7 million renovation of the 225-room Hampton Inn and the 127-room Homewood Suites. Selling the hotel was Florida-based Driftwood Hospitality Management, which bought the building housing the hotels for $90 million in 2007. Driftwood also sold nearly 100,000-square feet of office space in the building at 160 East Huron Street, as well as its parking garage.
4. Embassy Suites Schaumburg | $23 million
Pearlshire Capital Group in April bought the Embassy Suites in suburban Schaumburg for $23 million from Indianapolis-based Hotel Capital. The private equity real estate investment firm originally bought the hotel for $8 million in 2015. Schaumburg-based Pearlshire also owns the Hampton Inn & Suites in Downers Grove and the Holiday Inn Countryside LaGrange.
5. Holiday Inn Tinley Park | $22 million
Westmont-based Harp Group picked up this hotel connected to the Tinley Park convention center for $22 million. The firm will take over management of the convention center and plans to invest $9 million into the hotel before a possible brand change. To help with the deal, the village of Tinley Park passed a 1 percent increase in the local hotel tax to help subsidize a $4 million package of incentives for Harp.
The top 5 Chicago hotel sales in 2018
| NAME | 33 East 74th Street | PRICE RANGE | From $14,750,000 to $32,000,000 |
| ADDRESS | 33 East 74th Street | SIZE RANGE | From 3,889 Sq Ft to 6,312 Sq Ft |
| TYPE | Conversion | AVG PPSF | $4.431 |
| TOTAL UNITS | 10 | TAX ABATEMENT | No |
| DEVELOPER | JZS Madison LLC | AVG COMMON CHARGE | $1.40/sf |
| BROKER | Douglas Elliman | FINISHED BY | Early 2015 |