Sterling Bay sells hotel in Michigan Avenue tower for $74M

Chicago developer Sterling Bay is cashing in big on the sale of a “micro-hotel” on Michigan Avenue.

Dutch hotel brand citizenM, which operates the hotel, paid more than $74 million for the hotel portion of the tower at 300 North Michigan Avenue that Sterling Bay developed along with Magellan Development Group, Cook County property records show, or about $265,000 per room. The 280-key hotel occupies 10 floors of the 47-story tower.

The hotel takes up floors six through 15 of the 523 foot-tall tower. The rest of the building comprises 289 luxury rental apartments and 25,000 square feet of retail space. Construction on the property began in early 2020.

Chicago’s bKL Architecture designed the tower, while Dutch design firm Concrete handled the hotel’s interiors. Wanxiang America Real Estate Group, a Chicago-based real estate investment arm of Chinese auto parts manufacturer Wanxiang Group, is an equity investor in the project.

citizenM bills itself as an “affordable luxury” hotel company, offering 150-square-foot rooms with modern design and app-controlled utilities. Rooms at the Chicago location start at $249 a night.

The brand has locations in major cities in Europe, Asia and the United States, including New York, Los Angeles, San Francisco, Boston, Seattle, Washington, D.C., and one in Miami’s Brickell neighborhood with two more in the pipeline for the city. The group paid $9 million for the hotel portion of a mixed-use tower at 1212 Lincoln in 2020. Its Miami Worldcenter location is set to open in January 2023.

citizenM is also making its first foray into Texas, breaking ground on a $67 million, 17-story hotel tower in downtown Austin in January.

citizenM enters the Chicago hotel market in the midst of an uneven post-pandemic recovery. The occupancy rate for Chicago hotels stood at 56 percent in the first six months of 2021, compared with 67 percent in the last pre-Covid year of 2019. Revenue per available room dropped from $81 to $94.

Still, Chicago’s hotels are performing on par with other major U.S. cities including New York, where the occupancy rate dropped to 68 percent from 83 percent in 2019, and revenue fell to $172 from $195. In Los Angeles, the occupancy rate declined to 70 percent from 79 percent in 2019.

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