Lender Rialto Capital Lists Distressed JW Marriott Chicago

The lender that foreclosed on a downtown hotel nearly two years ago wants to offload it, at a time when Chicago’s hospitality industry is starting to climb out from the pitfalls of the pandemic.

Miami-based special servicer Rialto Capital, representing bondholders, has hired JLL brokers to sell the 12-story, 610-key JW Marriott Chicago at 151 West Adams Street, Crain’s reported.

The hotel was previously owned by a venture of Orlando-based Estein USA, which defaulted on a $203.5 million loan in 2022, triggering foreclosure proceedings.

While an asking price has not been disclosed, the hotel was appraised at $228 million a few months ago, equating to over $370,000 per key. If the hotel sells for close to that amount, it would mark the highest price per room for a Chicago hotel in over two years, second only to the ultra-luxury St. Regis Chicago, which traded for $700,000 per key.

The sale comes as Chicago prepares to host a slew of summer events, including the NASCAR Chicago Street Race, Lollapalooza and the Democratic National Convention, all expected to boost local hotel revenues.

Summer event season played a crucial role last year in Chicago’s recovery from the pandemic, which caused downtown foot traffic and leisure to plummet. Through the first half of last year, hotel revenue reached a record high of $1.12 billion, up 24 percent from the same period in 2022, according to data from Choose Chicago. Room demand totaled 1.56 million halfway through last year, marking a 28 percent year-over-year increase.

Despite optimism surrounding Chicago’s lodging industry, finding a buyer for the JW Marriott may prove challenging. Hotel sales in the Chicago area dropped by 60 percent last year, compared to 2022, due to high interest rates and tight lending standards. The sales decline outweighed the national drop of 47 percent, according to MSCI Real Assets.

JLL is emphasizing the JW Marriott Chicago’s potential to benefit from the ongoing recovery and investment in the Loop.

Estein USA invested nearly $15 million in room renovations before facing foreclosure in 2021. Rialto has since spent another $5 million on ballroom and event space renovations. Additional revenue opportunities include reconfiguring the lobby to enhance food and beverage offerings and adding a tenant amenity fee of $25-$30 per night, potentially boosting gross profits by $1.3 million annually.

The hotel’s prime location also works in its favor, situated near LaSalle Street, where $151 million in taxpayer subsidies are in line to convert office space into apartments. In addition, Google is transforming the nearby James R. Thompson Center into its new Midwest headquarters.

Last year, the JW Marriott Chicago generated $12.3 million in net operating income, according to data from CoStar Group.

—Quinn Donoghue