Owners of the hotel within the St. Regis Chicago skyscraper have borrowed $125 million from a Mexican lender, significantly increasing the debt on the 192-room property that they bought in 2023.
A joint venture of Gencom and GD Holdings on Monday announced the loan for the St. Regis hotel at 363 E. Wacker Drive, with the new loan provided by Banco Inbursa.
The deal refinances the hotel on lower floors of the 101-story St. Regis Chicago skyscraper, which the firms bought in 2023 in a deal backed by $76 million in debt from Varde Partners.
The much larger debt is an apparent indication that the luxury hotel on the lower 11 floors of the Jeanne Gang-designed tower has gained substantial value since the 2023 deal that coincided with the hotel’s opening.
In a statement announcing the refinancing, the hotel owners said the hotel has established itself as one of the city’s top luxury destinations in part because of limited new high-end supply.
“The refinancing secured with Banco Inbursa reflects the strong operational performance and market positioning the St. Regis Chicago has achieved since our acquisition three years ago,” Karim Alibhai, founder and principal of Gencom, said in the statement. “As the first luxury hotel to open in downtown in over a decade, the property has resonated with both business and leisure travelers, as well as the local community, reinforcing our conviction in the Chicago market’s long-term fundamentals.”
Performance helps tower land new loan
A spokesperson for the owners said the more conservative financing in 2023 came before the full ramp-up of the hotel. Today’s stronger cash flow, operating history and market position have pushed up the hotel’s value and allowed for increased debt in the refinancing.
The Chicago property was Gencom’s fourth financing deal with Banco Inbursa, according to the statement.
“This successful refinancing of the St. Regis Chicago underscores our ability to drive value through operational execution and strategic asset management, while reinforcing our confidence in the hotel’s continued performance,” Alessandro Colantonio, chief investment officer at Gencom, said in the statement. “It also represents an important expansion of our partnership with Banco Inbursa as we continue to access global capital sources across both asset acquisitions and refinancings.”
The 2023 hotel sale was part of a forward purchase agreement in which Miami-based Gencom and Denver-based GD Holdings, a U.S. affiliate of Mexican textile giant Grupo Denim, agreed in 2020 to buy the hotel upon its completion.
Plans to sell the hotel weren’t made public until the sale was finalized in May 2023.
The seller was Chicago-based Magellan Development Group, which completed the residential portion of the city’s third-tallest skyscraper in 2020. Condominium buyers began moving into the 1,191-foot-tall tower late that year.
At the time they agreed to buy the Chicago hotel, opportunistic investors Gencom and GD Holdings wagered that the purchase price for a luxury hotel would look relatively modest in the years to follow.
The 2023 sale price was not disclosed, and the exact price is unclear from online property records. But the deal — struck less than a year into COVID-19, a turbulent time for the hospitality industry and the broader economy — was believed to be for less than the cost of construction.
Magellan kept a small ownership stake in the 2023 sale, but the developer has since sold its stake to Gencom and GD Holdings, Magellan CEO David Carlins told CoStar News on Monday.
In 2023, Magellan said the hotel sale allowed the firm to lower its overall investment in the $1 billion development project while lowering its risk.
Chinese investor exits
Magellan developed the skyscraper with China’s Dalian Wanda Group, with that firm expected to bring its first Wanda Vista hotel to the United States. But Wanda Group eventually sold its 90% ownership interest to a Magellan-led venture in late 2020 as the firm faced pressure from the Chinese government to reduce overseas investments.
That helped put Magellan’s hotel sale in motion. Marriott International’s St. Regis brand struck a naming-rights deal for a tower previously known as Vista Tower.
The hotel includes meeting and event spaces, spa, fitness center, indoor swimming pool, rooftop terrace and two restaurants.
“We believe The St. Regis Chicago is one of the most compelling luxury hospitality assets in the country,” Abraham Marcos, Principal of GD Holdings, said in the statement. “This refinancing positions us to continue executing at a high level while unlocking the full potential of the property over the long term.”
St. Regis Chicago is within Magellan’s broader, 28-acre development known as Lakeshore East.
The mixed-use project along the Chicago River, Lake Michigan and Millennium Park also includes another skyscraper from Chicago-based architect Gang, the 82-story Aqua at Lakeshore East.
Los Angeles-based Ares Management and Magellan put the 474-unit multifamily portion of that tower on the market for sale late last year before instead refinancing it with a $144 million loan.