The city's community development commission has endorsed up to $18 million in tax increment financing, about 16% of the project's cost, which could be reduced if Sage Hospitality Resources succeeds in getting more than $14 million from the sale of new market tax credits. The TIF assistance will be reduced dollar for dollar if new market tax credit proceeds exceed $14 million.
Sage Hospitality Resources executive vice president Kenneth J. Geist says his company has been attempting to acquire the hotel at 636 S. Michigan Ave. for five years. The property has been vacant since 1999 as plans by Tennessee-based Maharishi Global Development Fund to convert the building into about 100 luxury condominiums have fizzled.
Although Maharishi Global Development Fund has sought a much higher price, according to the city's department of planning and development, Sage Hospitality Resources has struck a deal to buy the 321,516-sf asset overlooking Grant Park for $22.3 million. Still, city appraisals place the value of the hotel at $16 million to $19 million.
When complete, the appraised value of the Blackstone Hotel--the name will be retained under the Marriott Renaissance flag--is likely to be less than the total cost of Sage Hospitality Resources' project, department of planning and development officials say. The building, which has hosted several US presidents, is in a "severe state of disrepair," they add. McHugh Construction and architect Lucien LaGrange have been hired for the work.
Geist says his company will hand over a deposit for the purchase of the hotel, with a closing to follow city council approval. JP Morgan Fleming Asset Management is expected to provide financing, he adds. Work could start later this year, with an opening in the middle of 2007, he says.
The city assistance for the redevelopment is opposed by Unite Here Local 1, which represents 14,000 Chicago hotel workers. The union notes the total cost is $345,000 per room, which overshadows the expected sales price of Hilton Corp.'s Palmer House as well as the Fairmont's sale earlier this year. The union marked its second anniversary Tuesday of its strike against the Congress Hotel, located one block north. The union's Pittsburgh local and Sage have wrangled in that city. "Sage must take steps to ensure the city's investment in this project is not put at risk of another bitter, embarrassing labor dispute," says Local 1 research director Lars Negstad.
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