CHICAGO—Hospitality Properties Trust confirmed on its third-quarter earnings call last week that it acquired the former Hotel 71 in Chicago for $85 million and will rebrand it as the Wyndham Grand Chicago Riverfront.
HPT—which owns 288 hotel properties with approximately 43,000 rooms in the United States—plans to spend an additional $18 million renovating the 437-room hotel.
“This hotel will undergo renovations in the first and second quarters of 2013 to renovate some rooms, add meeting space and modernize elevators,” said John G. Murray, president and COO. “Wyndham will manage the hotel, which will be added to our existing portfolio management agreement.”
Five of the floors will be leased to, renovated and operated by Wyndham Vacations, Murray said.
The former Hotel 71 will be the 21st Wyndham in HPT’s portfolio, which is made up primarily of Marriott International-managed hotels (122) and hotels managed by InterContinental Hotels Group (91). Also in the portfolio are 22 hotels managed by Hyatt Hotels Corporation, 21 hotels managed by Wyndham, 21 hotels managed by Sonesta, and 11 hotels managed by Carlson Rezidor Hotel Group.
Murray said HPT is “currently evaluating other possible acquisition opportunities with Wyndham.”
The seller, Canyon Capital Realty Advisors, paid approximately $34 million for the property in December 2009, according to ChicagoRealEstateDaily.com. Canyon Capital took over the hotel after developer Robert Falor defaulted on approximately $128 million in debt, the site reported.
A spokeswoman for Canyon Capital declined comment.
Under the management agreement with Wyndham, HPT will receive a minimum annual return from the hotel of $5.8 million and a maximum of $29 million, ChicagoRealEstateDaily.com reported.
“The $85-million price is consistent with our expectations for the high-quality, well-located asset in a major (central business district) market,” said Senior Analyst David Loeb of Robert W. Baird in a research note. “Pre-renovation, the asset will add $6.8 million to annual minimum rents (an 8% return on investment) and the asset will increase Wyndham's minimum guarantee from $20 million to $29 million.”
Loeb said the hotel traded in March 2005 for $95.5 million and the owner defaulted on $128 million of loans in 2007 after a failed attempt at selling some of the hotel rooms as condominium units. After two trips through bankruptcy court, Loeb said, the hotel was purchased by Canyon in December 2009 for $34 million.
Canyon completed a $15-million renovation in the spring of 2011.
“Our initial view is positive as the pending acquisition would strengthen HPT's portfolio with a high-quality asset and is in line with the company's stated goal of growing and diversifying its portfolio,” Loeb said.