Blackstone Is in Line for $112M Overhaul
By Mark Ruda
Last updated: June 15, 2005 08:21am
CHICAGO-Sage Hospitality Resources, LLC is buying
the historic Blackstone Hotel, converting it to a
Marriott Renaissance franchise in a $112-million
renovation. In addition to upgrading the 327 rooms,
the Crystal Ballroom and adding 12,000 sf of
meeting space, Denver-based Sage Hospitality
Resources will spend about $20 million alone on
restoring the 97-year-old hotels terra cotta
facade.
The citys community development commission has
endorsed up to $18 million in tax increment
financing, about 16% of the projects 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 citys
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 Fairmonts sale earlier this
year. The union marked its second anniversary
Tuesday of its strike against the Congress Hotel,
located one block north. The unions Pittsburgh
local and Sage have wrangled in that city. Sage
must take steps to ensure the citys 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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