CHICAGO-The Phoenix-based Virgin Group has announced its first foray into the hotel development market by the purchase and planned conversion of the Old Dearborn Bank Building in the East Loop. The 27-story office, built in 1928, is nearly empty after the property was involved in a troubled loan situation in 2009.
Sources say Urban Street Properties LLC purchased the site for $5.5 million in April 2010, after the property went into default of a $9 million loan during a planned apartment conversion. Anthony Marino, managing partner of leisure and hospitality for Virgin Group, tells GlobeSt.com that Virgin Hotels bought the building this past weekend. Marino, head of the new company, would not comment on the purchase price or the conversion cost.
Virgin Hotels was launched in September 2010 to buy hotels or convert buildings to hotels in core markets such as Los Angeles, Miami, New York, San Francisco, Chicago, Washington, DC and London. Marino says his firm should be able to convert the nearly empty 186, 000-square-foo office building, at 203 N. Wabash Ave., by fall 2013.
He says Virgin is still working on gaining sites in the other US cities, meaning this may not be the first property to open for the company. “I think over the next 10 years we’ll get to up to 25 hotels, and I think in the next five years we should get to half that,” Marino says.
Marino wouldn’t elaborate on the layout or amenities for the property, but says he thinks the hotel will have a great draw from foot traffic and current Virgin customers. “We are very excited about the location,” he says. “It’s just a block of the Chicago River and a block from Michigan Avenue, at the heart of business, restaurants and high-end residential.”
Hotel development had been getting close to the explosive activity seen in multifamily today, but Marino says the market has taken a pause in the past 90 days. “We’re just living in volatile times,” he says.
His firm has hired the locally based John Buck Co. to complete the conversion. Buck has redeveloped properties such as the Standard Hotel in New York and the Palomar Hotel here.
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