Neighborhood Hotel Needs Investors for Chicago Redevelopment

The future of a hotel redevelopment plan in the West Loop is in question as the owners, The Neighborhood Hotel, seek a partner or buyer to take advantage of entitlements and tax credits in place.

The Chicago-based hospitality firm bought the 1910s-era building at 801 West Madison in 2022 for $14 million with a $9 million loan from Experiential Capital Group. The loan’s maturity has since been extended twice from May to October 2024 and finally to April 1, 2025, public records show.

Initial plans for the vacant 82,000 square foot building, which was previously a bank, included a 76-key hotel with 20,000 square feet of ground floor retail.

CBRE marketing materials for the property advertise it as a joint venture opportunity but state that the owners are also open to selling. The property has already received the entitlements necessary to start the project and $17 million worth of state and federal historic preservation tax credits.

“With a fully permitted plan for The Neighborhood Hotel, we are seeking a new investment partner— or outright sale—to help recapitalize the project, optimize loan sizing, and secure construction financing,” Neighborhood Hotel CEO Jonathan Gordon said.

Brokers for the developer did not respond to requests for comment.

The Neighborhood Hotel operates four apartment-style hotels in Chicago and Southwest Michigan, and the company’s website promotes a 2026 opening for a Gatsby-inspired hotel at the former West Loop bank building.

The trendy hotels have received glowing coverage in publications like Architectural Digest, Condé Nast Traveler and Midwest Living, but The Neighborhood Hotel’s strong brand may not be enough to counteract market challenges stalling other real estate developments in Chicago.

Chicago’s hotel market is experiencing a mix of recovery and challenges, with high-end hotel projects being proposed in areas like Fulton Market indicating investor confidence. However, hotel owners are grappling with sharply rising property tax valuations that have more than doubled, which threatens profitability and investor sentiment despite some improvements in revenue per available room. While there are signs of growth, the market is not fully back to pre-pandemic levels, and many hotels continue to face financial pressures.

Editor’s note: this article was updated to include a statement from The Neighborhood Hotel CEO Jonathan Gordon.