CHICAGO-One out of three spring hotel deals in Chicago has finally closed, reflecting the cool-off of what was a frothy hospitality market downtown around April. A joint venture of locally based Walton Street Capital LLC and AJ Capital Partners has purchased the 246-unit Sutton Place Hotel in the Gold Coast neighborhood for less than $70 million.
The hotel was built in 1988 and sold by Hong Kong-based owner Christopher Ho Wing On, who has owned the property since 1995. The hotel includes a bar and restaurant, 7,160-square-foot of meeting space and a fitness center.
The property was put on the market at about the same time as Hotel 71 and the Wyndham in Streeterville, but the other two sites are still sitting on the sidelines, says Peter Greene, first vice president of CBRE Hotels. His firm represented “Mr. Ho” in marketing the Sutton, which saw a sale deal in the summer to Cornerstone Real Estate Advisors and Sage Hospitality Resources fall through.
“There had been a lot of money chasing everything in the spring, we had 20 offers when we came out then,” Greene says. “Then during the summer there was the talk of a double-dip recession that scared everybody, and the market has been closed down since.” He says after the summer deal fell through, CBRE launched a targeted approach and found the Walton-AJ venture, which was able to put up 95% of the earlier offer. He wouldn’t comment on the price, but says the rumored cost of $73 million is “inaccurate.” A source tells GlobeSt.com that Ho sold the hotel for less than $70 million.
Greene says Ho already sold a few Sutton hotels in Canada, and had only this property left in the United States. “He felt he could do better with deals in his home country of China,” Greene says.
For the US hotel market in 2012, Greene says the underlying business is strong, with occupancies up at more than 70% and rates starting to increase in the downtowns. However, there’s still too much uncertainty to gain back the flock of buyers seen at the beginning of 2011. “There are the institutions like the Waltons and the Watertons, they’ve got the resources,” he says. “But the REITs aren’t able to raise money, and a lot of players just can’t get substantial leverage.”
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