One of Chicago's most prominent hotel investors has purchased the Thompson Chicago in the Gold Coast, marking one of the largest Chicago hotel sales since the start of the COVID-19 pandemic.
In a bold bet on the recovery of the downtrodden local hotel market, Oxford Capital Group this week bought the 247-room hotel at 21 E. Bellevue Place, according to sources familiar with the deal. Oxford bought the property from a joint venture of Chicago-based Walton Street Capital and Nashville, Tenn.-based AJ Capital Partners.
The exact sale price is unclear, but sources said Oxford paid between $70 million and $75 million for the hotel, higher than the $65 million mortgage the Walton Street-AJ Capital venture took out on the property when it refinanced it in January 2020, according to Cook County public records. That puts the transaction in line with other downtown hotels that have changed hands during the pandemic at or close to the value of the debt they are carrying—a reflection of the risk associated with buying a hotel amid a crisis that has hammered demand and may be slow to recover.
Oxford, known locally as the owner of the LondonHouse hotel and Le Méridien Essex Chicago on Michigan Avenue among other properties, is raising its bet on the Chicago hospitality market by picking up "a great asset in an excellent location and at an attractive price," Oxford Chairman and CEO John Rutledge said in a statement.
"We believe the timing of this transaction coinciding with Chicago's post-pandemic recovery progress is auspicious," Rutledge said in the statement. "We are also sanguine that our national experience, as well as our longstanding history in Chicago and its various submarkets, will position Oxford and its investors for a successful outcome."
Oxford's purchase comes in the early days of an especially slow recovery for the downtown hotel market from COVID-19's brutal assault on the hospitality industry. Downtown hotels that were open in June average just less than $74 in revenue per available room, a key metric that accounts for occupancy and room rates, according to data from hospitality data and analytics company STR. That was up from $21 in June 2020, but still well below the $229 average in June 2019, STR data shows.
The Thompson is the second major downtown hotel Walton Street has sold during the pandemic. The investment firm last fall unloaded the Waldorf Astoria Chicago hotel two blocks south of the Thompson to billionaire investor Joe Mansueto, a deal that wiped out all of its equity in the property as well as a portion of Wells Fargo's senior loan on the hotel.
Walton Street fared much better in the Thompson deal, though it fell way short of the massive windfall the owners were expecting before the pandemic.
Walton Street and AJ Capital paid $64 million in 2011 for the hotel—then known as the Sutton Place hotel—an acquisition it financed with a $55 million loan, according to public records. After renovating it and rebranding it as the Thompson, the owners put it up for sale in 2015 in an offering that AJ Capital CEO Ben Weprin expected to fetch more than $140 million. But Walton Street and AJ Capital refinanced the property instead in 2016 and again in 2020 with the most recent loan, records show.
A spokesman for Walton Street couldn't be reached.
Walton Street and AJ Capital have pulled off more lucrative hotel turnarounds before. A joint venture of the duo bought the Hotel Lincoln in a 2013 deal that valued the property at $45 million, then sold it in 2016 for $73 million, public records show.
At the Thompson, Walton Street and AJ Capital brought in Chicago chef Paul Kahan and One Off Hospitality Group to open its Nico Osteria restaurant on the hotel's ground floor. Oxford said in its statement the restaurant will be "revamped, leveraging its extensive wraparound outdoor sidewalk terrace seating and floor-to-ceiling operable windows."
Oxford isn't the only investor betting on the recovery of a downtown Chicago hotel, though it's one of the few. Chicago developer John Murphy recently bought the Holiday Inn Chicago Mart Plaza overlooking Wolf Point with a plan to dramatically renovate the property. Rhode Island-based Magna Hospitality Group bought the St. Clair Hotel in June, and in another of the largest downtown hotel sales during the pandemic, a venture of Mexican resort owner Rodina Group bought the St. Jane hotel on Michigan Avenue last year, renovated it and rebranded it as the Pendry Chicago.
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August 04, 2021 at 04:45AM
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Oxford Capital Group buys Thompson Chicago hotel - Crain's Chicago Business
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