Pebblebrook to sell River North hotel, retail as tourism reemerges

Pebblebrook Hotel Trust is ready to shuck a big retail slice of Chicago’s famous Marina City towers — which have a cylindrical design constantly likened to cobs of corn — and the firm is also testing the hotel market with a property next door as tourism rebounds.

Maryland-based Pebblebrook, whose CEO is Jon E. Bortz, has hired JLL brokers Adam McGaughy and John Nugent to market the 354-room Hotel Chicago at 333 North Dearborn Street and the retail and parking portions of the historic Marina City towers next door, Crain’s reported.

The two properties could be sold together or separately, according to marketing materials. The Marina City offering includes 146,000 square feet of dining, entertainment and retail, as well as two 450-stall parking garages. No official asking prices have been revealed.

The Pebblebrook listings follow the trend of other hotel landlords, including owners of the Virgin Hotel Chicago and the Blackstone Hotel, who have attempted to sell their properties as the city’s hospitality sector makes a comeback. However, high interest rates and a tight lending climate have hindered deal closures.

Plus, business travel has been slow to return from the pandemic, and rising labor costs have made it tough to turn a profit. Average revenue per available room downtown last year was about 7 percent below 2019 levels.

Hotel Chicago generated $7.4 million in net earnings last year, according to the company’s most recent annual report. That’s up from $600,000 in 2021 but still well below the $12.2 million it generated in 2019.

Notable Chicago hotels that recently traded include the $134 million sale of the St. Regis Hotel by Magellan to a joint venture of Gencom and GD Holdings earlier this month, and the $74 million sale of the new citizenM hotel on Michigan Avenue built by Sterling Bay, which was picked up by Dutch hotel brand citizenM, the operator of the property.

But both of those deals were negotiated while the assets were still under construction. Aside from them, the last big hotel sale in the city was last year, when California-based Sunstone endured losses in value from what the firm paid for the Embassy Suites Chicago Downtown and Hilton Garden Inn as they sold for a combined $130 million.

— Quinn Donoghue 

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