Blackstone Group is threatening litigation against the owners of office floors above its Club Quarters hotel in a shared downtown Chicago tower should they proceed with a residential conversion.
Blackstone, along with the lender foreclosing on the 429-key hotel at 105 West Adams Street, told city officials they’ll sue if Primera Group moves forward with a $184 million office-to-residential conversion above the hotel, Crain’s reported. The dispute surfaced at a Chicago City Hall hearing on whether to landmark the 41-story Art Deco tower, a key step in unlocking subsidies for the project to turn 29 floors of vacant Loop offices into apartments.
The hotel occupies floors three through 10. Blackstone and special servicer CWCapital Asset Management, argued an easement agreement bars either side from rezoning without consent. Their attorney warned landmarking and rezoning could “invite litigation” that would stall the project further.
A venture led by Gabriel Martinez’s Chicago-based Primera Group and investor Marc Calabria bought floors 11 through 40 last year. The buyers paid $11 million, an anonymous source told the outlet. That would be $33 per square foot. They are seeking to turn the office space into 400 apartments with the help of $68 million in TIF money through the LaSalle Street Reimagined program, which former Mayor Lori Lightfoot launched in 2022 to bring more foot traffic to the city’s center post-pandemic.
The city tweaked its zoning rules in July to allow aldermen to back landmarked buildings for rezoning even if not all owners agree, a move Blackstone’s lawyer blasted as designed to cut the hotel out. Primera’s lawyers countered in a letter that the hotel owners had ample time to weigh in and have “repeatedly failed to participate meaningfully.”
The battle adds another layer of drama to one of the marquee projects in Mayor Brandon Johnson’s push to revive LaSalle Street Reimagined. Six conversions have been greenlit by his administration, totaling more than 1,800 units and $317 million in subsidies. The Clark Adams Building plan is among the largest.
That conversion was already facing a separate $15 million lawsuit from developers Celadon Partners and Blackwood Group, who claim Primera and Calabria stole their proposal. Celadon and Blackwood contend their proposal that was short-listed in 2023 bears too much resemblance to the Primera and Calabria plans. That plan called for 247 residential units and sought $60 million in tax increment financing.
The building was previously owned by a venture led by Chicago investor Musa Tadros, who defaulted on a $29 million loan used to refinance it in 2016.
Originally called the Bankers Building, the 1927 Burnham-designed tower has cycled through various uses. Landmarking would unlock $24 million in historic tax credits and help finance the conversion alongside developer equity and $77 million in debt.
— Eric Weilbacher