A group of investors bet that Chicago needed a trendy-but-affordable hotel option Downtown that appealed to young travelers, and their hunch was proved right this week.
New York-based developer Sydell Group and billionaire investor Ron Burkle’s firm Yucaipa sold the 16-story, 215-key Freehand Hotel to British private equity firm Queensgate Investments as part of a larger $400 million portfolio deal, Crain’s reported. Queensgate also acquired three other Freehand properties from the Sydell Group and Burkle.
The deal comes six years after New York-based developer Sydell and Yucaipa paid $13 million for the property at 19 E. Ohio St., performed a gut renovation with a $32 million loan, and repositioned the building as a hip budget hotel.
The hotel, according to Crain’s, had revenue of $10.9 million last year with an operating income of $2.2 million. It was appraised at $53 million in 2016, according to Bloomberg.
The deal comes not even a week after another downtown hotel, Kimpton Hotel Palomar, was bought by Service Properties Trust.
The downtown hotel scene, experts say, will experience a dip in revenue in the near future.
Coming off a hot period last year, development is surging, especially around Fulton Market, where four hotels have been built since 2014 and seven more are under development. But both occupancy and room rates are down from last year, showing a decline in demand. Experts say that only some hotels will survive.
[Crain’s] — Kelsey Neubauer