A Florida real estate investment trust has a contract to sell a Chicago hotel for $36 million, taking a big loss to exit a city that it expects to make a slow recovery from COVID-19.
Xenia Hotels & Resorts said it has an agreement to sell the 191-room Kimpton Hotel Monaco Chicago for $36 million, or almost $188,500 per room, the Orlando, Florida-based REIT said in a statement.
The buyer, which was not identified, has made a nonrefundable deposit on the purchase expected to be finalized in the first quarter of 2022, the statement said.
The 13-story hotel is at 225 N. Wabash Ave., near the Chicago River and North Michigan Avenue.
If it’s finalized as expected, Xenia’s sale will come at a significant loss from the property’s last sale price of just over $53 million in 2013, according to Cook County records. That was part of Oak Brook, Illinois-based Inland American Real Estate Trust’s $189 million deal for three Kimpton-managed hotels. The others were in Denver and Salt Lake City.
In 2015, Inland spun off its hotel investments into the Xenia REIT.
Xenia gave the Kimpton Hotel Monaco Chicago a major renovation that was completed in 2019, before the pandemic, adding to the firm's investment in the property.
Despite the big loss, Xenia said the $36 million sale price “represents a compelling multiple on both prior and expected near-term earnings” of the Kimpton Hotel Monaco Chicago. With the sale, “the company will have successfully exited the Chicago market, which has been challenged over the past decade due to multiple factors, such as outsized expense inflation and new hotel supply growth, and is expected to have a longer cash flow recovery path relative to most other market’s in the company’s geographic mix.”
The Kimpton Hotel Monaco Chicago sale would represent the lowest price per room among “upper upscale” hotel sales downtown this year, according to CoStar data. The others were the 178-room Talbott Hotel, which FullG Capital bought for $54 million, or more than $303,000 per room; and the 247-room Thompson Chicago, which Oxford Capital Group bought for $70.9 million, or more than $287,000 per room.
Xenia previously planned to sell its Chicago hotel as part of a $483 million sale of seven total Kimpton hotels to SBG in early 2020, before the Singapore-based buyer walked away from the deal after the onset of the health crisis.
Downtown Chicago hotels have been hit hard by a major slowdown in conventions and business travel, leaving some in financial distress. Among them is the city’s second-largest, the 1,641-room Palmer House Hilton, which faces a $338 million foreclosure suit.
Hotel occupancy in the Chicago area fell to 35.5% in 2020, with revenue per available room, or RevPAR, down to $33, a 68% drop from pre-pandemic levels, according to data from STR, a division of CoStar Group. This year is projected to end with 49.7% occupancy and $59 RevPAR.
Although it has slowed, some development continues. Near the Kimpton Hotel Monaco Chicago, Sterling Bay and Magellan Development Group recently topped out construction of a 47-story apartment and hotel tower at 300 N. Michigan Ave. that will include a 280-room citizenM hotel.
A few blocks north of there, Spanish firm RIU Hotels & Resorts recently completed the $28 million purchase of a site at 148-158 E. Ontario St. where it plans to begin construction in March on a 390-room hotel.