Chicago Loop Hotel Foreclosure Clouds Conversion Plans

Another Loop hotel has slipped into distress, with fallout that could ripple into one of the city’s largest office-to-residential conversions.

CWCapital Asset Management is moving to seize the 429-key Club Quarters at 111 West Adams Street after submitting a $30 million credit bid at a Cook County sheriff’s sale, Crain’s reported. The Washington, D.C.-based special servicer represents bondholders on a $274 million loan tied to the Chicago property and three other Club Quarters hotels owned by Blackstone. The New York private equity giant defaulted on the debt during the pandemic, when travel demand cratered, and foreclosure proceedings have been underway since last year.

The takeover adds another distressed asset to downtown’s growing roster. But the timing is especially thorny for the Clark Adams Building, a 41-story tower where the hotel occupies floors three through 10. Developer Primera Group is pushing a $184 million plan to convert much of the office space above into 400 apartments. That project, which counts on $68 million in tax-increment financing, is one of several Loop office conversions backed by a $317 million subsidy program launched under former Mayor Lori Lightfoot.

Primera’s plan has preliminary TIF approval but still requires Chicago City Council sign-off — and a zoning amendment for the entire property. Normally, that would mean buy-in from the hotel owner, raising the question of whether CWCapital will support or obstruct the conversion. The lender declined comment to the outlet.

As reported previously in The Real Deal, the planned residential mix includes 195 studios, 122 one-bedrooms, and 83 two-bedrooms, with 121 units designated as affordable for households earning 60 percent of the area median income, which translates to about $53,000 for a two-person household. The TIF funds would cover 37 percent of project costs, a higher share than is typical for such subsidies.

City Hall may have a workaround. A new ordinance allows landmarked towers with multiple owners to secure alderman-backed zoning changes without unanimous consent. If the 1927 Burnham-designed building wins landmark status, Primera could push ahead even without the hotel’s cooperation.

The foreclosure underscores the uneven recovery in downtown hospitality. Blackstone walked away from the Club Quarters portfolio years ago, with a spokesperson calling it “a very small investment” already written off.

— Eric Weilbacher