"Our market research has indicated that despite the growing number of for-sale condominiums in the Chicago market, there may be a separate demand for fractional ownership within the context of the full-service, branded, luxury hotel format," says president and chief executive officer Laurence S. Geller during his company's recent earnings conference call. The test marketing at the 692-room Fairmont, which the company acquired for $158 million earlier this year, will include an equal number of condominium hotel units that will be models for new Gold rooms in the rest of the property at 200 N. Columbus Dr., and fractional ownership units that will be two-bedroom apartments.

If the test marketing is successful, Strategic Hotels & Resorts could sell up to eight entire floors under the condominium and fractional ownership concepts. "If it's not successful, the downside is we have a great two-bedroom apartment unit to offer," Geller says.

Further west, Strategic Hotels & Resorts hopes to replace the north tower of the InterContinental with a 71-story building that will include 310 condominiums in addition to 150 hotel suites as well as 11,000 sf of new Michigan Avenue retail space. "We believe there's a real opportunity to take advantage of a large and strong residential premium for Michigan Avenue condominiums, particularly on the higher floors," Geller says.