A California luxury hotel company has purchased the former Hard Rock Hotel on Michigan Avenue and will rebrand it after giving the historic building its second facelift in three years.
In a bold bet on the future of Chicago's COVID-19-embattled hospitality industry, Laguna Beach, Calif.-based Montage International announced a plan to renovate the landmark Carbide & Carbon Building at 230 N. Michigan Ave. after acquiring the property from longtime owner Becker Ventures, according to a Montage spokeswoman. The hotel will be rebranded the Pendry Chicago.
The purchase comes less than three years after Becker undertook a massive renovation of the hotel and rebranded it as the St. Jane Chicago—named for activist Jane Addams—which debuted in early 2018. Now Becker has sold the property amid a public health crisis that has pummeled downtown hotels, with travel sapped and little clarity about when it will come back.
A Montage spokeswoman did not disclose the price of the sale and Becker Ventures couldn't be reached. But the transaction likely deals a major financial blow to the sellers, based on the decimated appraised values of downtown hotels because of the COVID-19 pandemic.
Becker refinanced the 40-story building in 2017 with a $75 million loan and teed up a renovation that included adding dozens of suites, a rooftop bar and lounge and 11,000 square feet of meeting and event space. The cost of the renovation is unclear.
It was a big bet: The new loan, issued by Little Rock, Ark.-based Bank OZK, replaced $48 million in debt Becker had taken out five years before, when it had to come up with $21.5 million in cash just to retire a previous mortgage. Becker expected the building's value would jump after the renovation and with Chicago experiencing record-high tourism numbers for several consecutive years. The property had been appraised in 2012 at $91.6 million, according to documents tied to Becker's mortgage at the time. A Bank OZK spokeswoman couldn't be reached.
But the coronavirus has crushed hotels across the city, pushing many to cease operations for the foreseeable future and decimating hotel values. In the most stark case, the Palmer House Hilton—whose owner was recently hit with a foreclosure lawsuit—was appraised at 45 percent less than it was just two years ago, according to Bloomberg data tied to a loan on the property.
Montage, whose Pendry hotel brand has locations in San Diego and Baltimore and has others planned in West Hollywood, Manhattan and Park City, Utah, is wagering it can revive the 364-room hotel with another renovation of the Art Deco landmark, set to be completed in the spring, according to a statement.
“We are incredibly proud to bring Pendry to the great city of Chicago,” Montage founder, Chairman and CEO Alan Fuerstman said in the statement. “We plan to honor the history imbued in the Carbide & Carbon Building by elevating and accenting its iconic design, injecting the exceptional service and guest experience for which Pendry Hotels & Resorts are known, and celebrating the remarkable city through food, spirits, art and creativity.
Montage had been hunting for a Pendry location in Chicago for a while. It was negotiating a deal last year with Chicago developer Fulton St. Cos. to open a 12-story Pendry hotel in the Fulton Market District. No deal ever came together, and Fulton St. plans to build an office building on the property instead.
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Former Chicago Hard Rock Hotel sold to California luxury hotel company - Crain's Chicago Business
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