Less than a year after buying a 221-room hotel near the North Michigan Avenue shopping district, a New York firm is looking to convert it to apartments amid a slowdown in new housing supply in the nation’s third-largest city.
The owner of the Sonesta Extended Stay Suites Downtown Magnificent Mile hotel at 201 E. Walton Place is planning a “phased renovation” to convert the entire 18-story building to rental apartments, 2nd Ward Alderman Brian Hopkins told constituents in an email last week.
Plans to convert the property come as Chicago-area multifamily rent growth has consistently ranked among the highest in the country’s major markets. That is the result of suppressed new construction in recent years, compared with building booms in areas such as the Sun Belt where rents have fallen or remained flat because of the oversupply.
With the opportunity to capture upside on rents, but with building and financing costs high for new construction, some developers have bought properties such as high-vacancy office towers or hotels to convert them to apartments.
The hotel is owned by Churchwick Partners, which bought it for about $3 million last September, before financing it with a $68.2 million loan from Peachtree Group in October, according to Cook County property records.
The Woodmere, New York-based real estate firm bought the hotel as part of a larger portfolio sold by Service Properties Trust.
Hopkins told CoStar News that the plan would convert hotel rooms into a similar number of apartments. Hopkins said he has no objections to the plan but will withhold support until hearing from residents.
The alderman and a neighborhood group, the Streeterville Organization for Active Residents, are co-hosting a virtual meeting April 21 for Churchwick to outline its plans.
Specifics of the conversion plan, including how much it would cost and the construction timeline, are unavailable.
Asaf Fligelman, a partner at Churchwick Partners, said in an email to CoStar News that “Churchwick is excited to engage with the community on our proposal.” He otherwise declined to comment.
The Sonesta hotel is a short walk from Lake Michigan and from the shopping district known as the Magnificent Mile.
Other buildings in the area targeted for conversions to residential include the office and retail building at 500 N. Michigan Ave., most of which is slated to become 320 apartments, and loft offices at 230 E. Ohio St. that are set for conversion to 72 apartments.