Florida firm Pebb Capital to convert Streeterville hotel to apartments

Gale Chicago will keep 56 hotel rooms, add 140 multifamily units

Pebb Capital to Convert Gale Hotel in Streeterville to Apartments
Pebb Capital's Todd Rosenberg with 201 East Delaware Place (Pebb Capital, Google Maps, Getty)

The bulk of a Streeterville hotel is poised to take on a new life as apartments.

A venture of Florida-based Pebb Capital wants to convert the 170-room Gale Chicago hotel at 201 East Delaware Place into 140 multifamily units, 56 hotel rooms and commercial space, according to a recent zoning application, Crain’s reported

Pebb aims to preserve the historical Mediterranean-style architecture of the building, formerly known as the Raffaello Hotel, which was part of the short-lived condo-hotel trend in downtown Chicago.

The Raffaello Hotel underwent a contentious sale in 2019, when Miami-based Maxwelle Real Estate Group gained control of the site by acquiring a majority of the rooms. In 2022, a Pebb Capital affiliate acquired Maxwelle’s $29 million mortgage on the property, paving the way for the recent zoning application.

Downtown Chicago’s once-vibrant hotel market was struggling even before the pandemic, in part because of overbuilding and the need for costly renovations to remain competitive. Then the public health crisis further exacerbated the situation, leading to a decline in travel and temporary closures of many hotels. 

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While it’s been a big bounce-back year for the city’s lodging industry — thanks to large-scale events like Lollapalooza and NASCAR — downtown hotels are still on the mend. The average revenue per room in downtown reached $146.16 through the first three quarters of the year. That’s technically a little higher than the first three quarters of 2019, but lower than pre-pandemic figures when accounting for inflation, the outlet reported. 

In this shifting landscape, developers are finding apartments to be a more secure investment, especially in the downtown area where rents and demand continue to rise, despite high interest rates pushing property values down across the city.

Steeterville was temporarily home to the priciest multifamily deal of the year in Chicago, after Miami-based Crescent Heights bought the 400-unit apartment tower at 340 East North Water Street for $173 million. 

A couple of months later, the family office of Spanish billionaire Amancio Ortega topped that, paying nearly $232 million for the 492-unit, 45-story building at 727 West Madison Street in West Loop.

—Quinn Donoghue 

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