Churchwick Partners Eyes Chicago Hotel Conversion

A recently traded Streeterville hotel could be the latest casualty of Chicago’s shifting lodging market, as its new owner eyes a conversion to apartments less than a year after closing on the property.

New York-based Churchwick Partners is planning a “phased renovation” to turn the 19 story, 221-room Sonesta Extended Stay Suites at 201 East Walton Place into apartments, according to an email 2nd Ward Alderman Brian Hopkins sent to constituents last week.

The proposal, first reported by CoStar News, is another example of a growing trend in Chicago: repositioning underperforming or uncertain hotel and office buildings into housing, as multifamily fundamentals strengthen. Hopkins said the conversion would likely yield a similar number of apartments, though he has not yet endorsed the plan and is seeking community input before taking a position.

Churchwick acquired the property for about $3 million in September as part of a broader portfolio sale by Newton, Massachusetts-based Service Properties Trust. It then secured a $68.2 million loan from Atlanta-based Peachtree Group a month later, Cook County records show. The steep leverage suggests the firm is banking on a value-add strategy rather than long-term hotel operations, according to the publication.

The timing aligns with a widening gap between supply and demand in Chicago’s apartment market. Rent growth in the metro area has consistently ranked among the highest in major U.S. cities, driven in part by a slowdown in new construction.

Elevated interest rates and rising costs have stalled ground-up development, according to the outlet, but conversions, by contrast, offer a potentially cheaper path to new units, especially in buildings near transit and amenities. The Walton Place hotel sits steps from Lake Michigan and the Magnificent Mile, a prime location that could potentially command strong rents.

The project would join a wave of adaptive reuse efforts downtown, such as the century-old, 17-story office building at 70 East Lake Street and along North Michigan Avenue. Commonwealth Development Partners is pursuing a 320-unit office-to-residential conversion at 500 North Michigan Avenue, while a loft office building at 230 East Ohio Street is slated to become 72 apartments.

Details on Churchwick’s plan, including costs and timeline, remain unclear. The firm is expected to present its proposal at a virtual meeting with Hopkins and the Streeterville Organization for Active Residents on Tuesday.

— Eric Weilbacher