A chain of college-town hotels has opened a property in Evanston, trying to break into a market so bad that the suburb's best-known hotel is renting rooms to Northwestern University students to help it survive the COVID-19 pandemic.
Graduate Hotels today opened its first location in the Chicago area at 1625 Hinman Ave. next to the Northwestern campus, roughly a year after the boutique brand's owner paid $11 million for the historic former Homestead apartment building on the site and redeveloped it into the college-themed, 119-room inn.
The new hotel is the 28th nationwide with the Graduate brand, which developer AJ Capital Partners launched in 2014 as a chain of university-anchored hotels with designs that reflect the culture and history of the town and school nearby.
But the world has changed dramatically since AJ Capital began its $13 million renovation of the Evanston property. The coronavirus has pummeled the hospitality sector, sapping travel and pushing many Chicago hotels to cease operations amid a historic lack of demand. The crisis has also rocked universities, many of which have stumbled trying to safely get students back on campus this fall. At Northwestern, first- and second-year undergraduate students are not allowed on campus—including in residence halls—during the fall quarter and are taking classes remotely while third- and fourth-year and graduate students are on campus.
For the 269-room Hilton Orrington in downtown Evanston, that policy created an opportunity to generate some business at a time when there's little to seize. The property, which is owned by New York-based real estate firm Olshan Properties, has rented an undisclosed number of its rooms to Northwestern undergraduates this fall, according to people familiar with the rentals.
Terms of those housing arrangements are unclear and a hotel spokesman didn't respond to requests for comment. But the student rentals come as the property's owner faces a potential crunch on its $40 million mortgage, which was packaged with other loans and sold off to bondholders. Net cash flow at the property during the 12 months ended June 30 was less than $1.3 million, or less than half of its debt service liability over that period, according to a Bloomberg report tied to the loan. A master servicer overseeing the loan on behalf of investors modified the terms to allow Olshan to make lower mortgage payments from May through July, Bloomberg data show.
At the Graduate Evanston, meanwhile, student housing isn't an expected use for Northwestern's fall quarter, but the university has toured the space and expressed interest in renting rooms for students in the spring, said Graduate Hotels President David Rochefort. That would be in line with the 19 other Graduate hotels in other markets that are housing a total of around 1,300 students, Rochefort said.
Universities "truthfully need the help," Rochefort said. "They don't have the beds and have to solve really complicated problems....We're happy to play our part."
As for the logic of opening hotels during a pandemic—Graduate has opened six new locations over the past three months—Rochefort said the properties are "running lean" with fewer expenses such as less frequent housekeeping to limit guest-housekeeper interaction for safety reasons. That allows the property to breakeven with even low levels of demand, he said. "We know the pie itself is smaller right now, but we're really confident in our ability to get more than our fair share of the demand that comes to these markets.
"We'd much rather be open, inviting the community in and letting the Northwestern community experience what we've built," he said. During non-COVID times, the hotel will primarily cater to alumni, visiting professors looking for an extended stay and students' parents visiting the campus.
Rochefort said room rates this fall at the Graduate Evanston start at $99 per night, though he expects typical rates after the pandemic subsides to be closer to $150-$160.
Graduate Hotels has another six locations in development now, including its first outside the United States at Oxford and Cambridge universities in England.
AJ Capital Partners was founded by CEO Ben Weprin, who recently moved and relocated the company's primary office from Chicago to Nashville. The development firm is best known locally for projects including the Soho House hotel and private club in the Fulton Market District, the Chicago Athletic Association hotel on Michigan Avenue and the Hotel Lincoln in Lincoln Park.
Alby Gallun contributed.
The new hotel is the 28th nationwide with the Graduate brand, which developer AJ Capital Partners launched in 2014 as a chain of university-anchored hotels with designs that reflect the culture and history of the town and school nearby.
But the world has changed dramatically since AJ Capital began its $13 million renovation of the Evanston property. The coronavirus has pummeled the hospitality sector, sapping travel and pushing many Chicago hotels to cease operations amid a historic lack of demand.
The crisis has also rocked universities, many of which have stumbled trying to safely get students back on campus this fall. At Northwestern, first- and second-year undergraduate students are not allowed on campus—including in residence halls—during the fall quarter and are taking classes remotely while third- and fourth-year and graduate students are on campus.
For the 269-room Hilton Orrington in downtown Evanston, that policy created an opportunity to generate some business at a time when there's little to seize. The property, owned by New York-based real estate firm Olshan Properties, has rented an undisclosed number of its rooms to Northwestern undergraduates this fall, according to people familiar with the rentals.
Terms of those housing arrangements are unclear and a hotel spokesman didn't respond to requests for comment. But the student rentals come as the property's owner faces a potential crunch on its $40 million mortgage, which was packaged with other loans and sold off to bondholders.
Net cash flow at the property during the 12 months ended June 30 was less than $1.3 million, or less than half of its debt service liability over that period, according to a Bloomberg report tied to the loan. A master servicer overseeing the loan on behalf of investors modified the terms to allow Olshan to make lower mortgage payments from May through July, Bloomberg data show.
At the Graduate Evanston, meanwhile, student housing isn't an expected use for Northwestern's fall quarter, but the university has toured the space and expressed interest in renting rooms for students in the spring, said Graduate Hotels President David Rochefort. That would be in line with the 19 other Graduate hotels in other markets that are housing a total of around 1,300 students, Rochefort said.
Universities "truthfully need the help," Rochefort said. "They don't have the beds and have to solve really complicated problems....We're happy to play our part."
As for the logic of opening hotels during a pandemic—Graduate has opened six new locations over the past three months—Rochefort said the properties are "running lean" with fewer expenses such as less frequent housekeeping to limit guest-housekeeper interaction for safety reasons. That allows the property to break even though there are low levels of demand, he said. "We know the pie itself is smaller right now, but we're really confident in our ability to get more than our fair share of the demand that comes to these markets.
"We'd much rather be open, inviting the community in and letting the Northwestern community experience what we've built," he said. During non-COVID times, the hotel will primarily cater to alumni, visiting professors looking for an extended stay and students' parents visiting campus.
Rochefort said room rates this fall at the Graduate Evanston start at $99 per night, though he expects typical rates after the pandemic subsides to be closer to $150 to $160.
Graduate Hotels has another six locations in development now, including its first outside the United States at Oxford and Cambridge universities in England.
AJ Capital Partners was founded by CEO Ben Weprin, who recently moved and relocated the company's primary office from Chicago to Nashville. The development firm is best known locally for projects including the Soho House hotel and private club in the Fulton Market District, the Chicago Athletic Association hotel on Michigan Avenue and Hotel Lincoln in Lincoln Park.
Alby Gallun contributed.
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