Pebblebrook Hotel Trust is extending a selling spree with the listing of a Magnificent Mile hotel, setting up the firm’s departure from the Chicago market entirely.
The Maryland-based firm has hired JLL brokers Adam McGaughy and John Nugent to market the 752-room Westin Michigan Avenue Chicago at 909 North Michigan Avenue, five years after taking over the asset as part of its $715 million acquisition of LaSalle Hotel Properties, Crain’s reported.
An official asking price has not been revealed, but people familiar with the hotel expect offers to hover around $110 million, or $150,000 per room.
Pebblebrook sold the ground-floor retail portion of the hotel for $27.3 million in March, and several months later, put the 354-room Hotel Chicago at 333 North Dearborn Street up for sale. The firm has also been offloading properties in San Francisco, most recently selling the Hotel Zoe Fisherman’s Wharf for $69 million.
The new Chicago listing will serve as a litmus test for investor interest in one of the city’s largest hotels amid a subdued market for lodging sales, attributed to higher interest rates and economic uncertainty. The last major downtown hotel transactions occurred in March 2022, when the Embassy Suites Chicago Downtown and Hilton Garden Inn Magnificent Mile fetched a combined $130 million, as the seller of both, Sunstone Hotel Investors, also wanted out of Chicago.
The once-vibrant Mag Mile has also taken a beating since the pandemic hit, as retail vacancies have soared to nearly 30 percent in part because of a spike in online shopping and more acute perception of rising crime in Chicago held by many.
However, with the return of leisure travel following the pandemic, downtown hotels have seen an uptick in revenue per available room, averaging $146.16 during the first nine months of the year, the outlet reported, citing CoStar data. That’s a 9 percent increase from the same stretch in 2022 and slightly higher than pre-pandemic levels.
JLL is emphasizing the city’s tourism rebound and scheduled conventions to attract potential buyers. The Westin hotel has gotten $49 million in upgrades since 2012, including renovated guest rooms and public spaces.
While Pebblebrook CEO Jon Bortz acknowledged that Chicago’s recovery has been slow due to remote work affecting urban foot traffic, he expressed optimism about improving conditions. If Pebblebrook successfully sells both the Westin Michigan Avenue and Hotel Chicago, it will join other real estate investment trusts that have exited the Chicago hotel market over the past three years, such as Sunstone and Xenia Hotels & Resorts.
— Quinn Donoghue
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