Now the owners will find out how the market values the property amid a pandemic that pushed them to shutter the hotel for more than a year. The Blackstone is slated to reopen this week.
The asking price is unclear for the 22-story property across the street from Grant Park, but the move to sell comes more than a year into a crisis that has devastated hotel values and cast a harsh light on a downtown hotel market that may take years to return to pre-pandemic performance levels.
While that backdrop makes it look like a tough time to sell, Fundamental and Sage are staring down a deadline: A $52 million loan tied to the property matures June 1, according to Cook County property records, meaning the owners will need to either sell the hotel or refinance or modify terms of the loan soon—a potentially difficult endeavor given the uncertainty of local hospitality demand.
It’s not clear whether the maturing loan from New York-based Apollo Commercial Real Estate Finance prompted the owners to market the property; spokesmen for Fundamental, Sage and Apollo either couldn’t be reached or were not available to comment.
The owners’ venture paid nearly $58 million for the hotel in 2016, county records show, though that purchase price may not have included a stake that Sage previously owned in the property. Since then, Fundamental and Sage have spent $11.7 million renovating the hotel’s guest rooms and amenities and struck a franchise agreement with Marriott International to switch the brand from a Renaissance hotel to Marriott’s Autograph collection, according to the flyer.
The few downtown hotels that have traded during the crisis—including the Waldorf Astoria Chicago and St. Jane Chicago (recently rebranded as the Pendry Chicago)—have sold for significant discounts to their pre-pandemic valuations, though each was facing problems before the market came to a stop. Other big downtown full-service hotels such as the Palmer House Hilton and JW Marriott Chicago have also been appraised at a fraction of what they were worth just a few years ago.
Hodges Ward Elliott is playing up the potential comeback story for Chicago tourism in marketing materials for the Blackstone, which historically lures a mix of leisure and business travelers and hosts some 50 weddings a year with almost 22,000 square feet of meeting space. The brokerage is also framing it as an opportunity for a buyer to add value by bringing in a new restaurant for the hotel’s ground floor—replacing one now operated by Sage—and leasing other retail space in the building that previously housed a Starbucks.
Downtown hoteliers are hoping pent-up demand for leisure travel leads to a strong summer tourism season as more people get COVID-19 vaccinations. Some managers report bookings have ticked up recently, a badly needed positive sign after downtown hotels that were open averaged 27 percent occupancy in 2020—down from 74 percent in 2019, according to data from research firm STR.
Nicknamed the “Hotel of Presidents” for the dozen US presidents who have stayed there, the Blackstone originally opened in 1910 and was designated a Chicago landmark in 1998. The hotel is also tied to the political expression of a “smoke-filled room” to describe behind-the-scenes dealmaking because of a 1920 meeting there among cigar-smoking US senators to arrange the nomination of Warren Harding for president.
A Sage venture bought the Beaux Arts building in 2005 before renovating the property with a $128 million overhaul, fueled in part by more than $47 million in tax credits and other public sources such as city grants.
Tony Malk and Ryan Lindgren of Hodges Ward Elliott are marketing the Blackstone on behalf of Fundamental and Sage.