Murphy Development Group is testing the market for lodging assets in Chicago as other sellers have made concessions amid the hotel sector’s pandemic-induced slump.
The firm, led by CEO John Murphy, is looking to cash in on its 143-room Hampton Inn property, having hired Berkadia Hotels & Hospitality to sell the downtown asset, Crain’s reported. It was transformed into the hotel from the historic Chicago Motor Club at 68 East Wacker Place.
The Chicago-based developer converted the landmark building into the hotel that opened in 2015. There isn’t an asking price for the property, but a source familiar with the listing told the outlet bids are expected to come in at $40 million or higher.
Berkadia is marketing the 16-story Loop building as a gamble on the hospitality market’s post-pandemic rejuvenation.
The asset will likely net a profit for Murphy, which spent $9.5 million on the vintage Art Deco property in 2013. He financed the redevelopment with a $25.5 million loan in 2014 and opened it the next year. Then property was refinanced with another $20 million loan at the end of 2020.
Murphy said the improving hospitality market as well as a projected increase in business travel will bring in long-term investors.
Berkadia is emphasizing the property’s Class L tax incentive that Murphy secured when he was redeveloping the landmark building. The incentive lowers the assessed value of a historic property for tax purposes after it has been restored through pricey investment. The Hampton Inn has 11 more years of reduced property assessments, giving it an advantage compared to properties exposed to full tax liabilities.
Other sellers, including the REIT Host Hotels, have accepted markdowns on hotel assets in the Chicago area from their owner’s stated values. Host just sold a suburban Chicago Marriott in Downers Grove for $14.5 million after it stated in a 2021 valuation it was worth $30 million.
Originally opened in 1928 as the headquarters of the Chicago Motor Club, the building was designed by Holabird & Root. The renovation paid tribute to the original design by keeping a large map of the United States and displaying a 1928 Ford Model A in the lobby.
Murphy Development opened another revamped hotel property several blocks east in River North. The firm spent more than $40 million transforming the outdated 522-room Holiday Inn Chicago Mart Plaza at 350 North Orleans Street into a dual-branded hotel.
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Chicago hotels show mixed results in post-pandemic recovery
— Victoria Pruitt