A suburban Chicago hotel’s $14.5 million sale provides a hint at how far hospitality property values have slid since the pandemic slowed travel and slashed lodging revenues.
A joint venture of Frontier Development & Hospitality Group, Sun Development & Management Corp. and 3H Group picked up a 254-key hotel in Downers Grove at a steep discount from its 2021 appraisal. The deal breaks down to around $57,000 per room.
Seller Host Hotels & Resorts — a publicly traded real estate investment trust that bills itself as the largest lodging-focused REIT in the world with a market cap of $12 billion — valued Chicago Marriott Suites Downers Grove at $30 million in its 2021 annual report. Frontier CEO Evens Charles acknowledged the discounted price and said it presented a chance to buy low and increase the value over time.
Charles said Frontier saw the sale as an opportunity to acquire the hotel at a good basis, particularly in a down market.
The property is far from the first suburban Chicago hotel to sell at a discount, with several hoteliers cutting listing prices or taking a loss on their investment in recent months.
Charles also said the acquisition fits the mold of his Washington-based firm’s strategy of driving value and expanding in certain submarkets. The group’s portfolio includes hospitality and multifamily investments in urban and secondary markets across six states.
Host appears to be changing its strategy to focus on more markets with higher revenue per available room and exiting out of assets that don’t meet those targets, Charles said. Host, which is based in Bethesda, Md., didn’t return a request for comment.
Hiren Desai, president and CEO of 3H, said the property complements other joint venture properties that his Tennessee-based firm has in the Chicago area.
The acquisition marks Indianapolis-based Sun Development’s first joint venture with Frontier, chairman and CEO Bharat Patel said in a statement. The company operates 17 properties with more than 2,000 rooms across six states.
Host put the DuPage County hotel on the market in 2019, along with the 256-room Chicago Marriott Suites O’Hare in Rosemont. The Rosemont hotel sold in 2019 for $39 million to investor Ketu Amin, still a far cry from the $60 million Host said it was worth at the time. Yet that marked a smaller gap in terms of the percentage drop between Host’s valuations and the sale price on the Downers Grove property.
Read more
Commercial
Chicago
Suburban Chicago hoteliers take losses, cut prices for deals
Commercial
Chicago
Related exits top floors of Chicago Hilton seized in distress