Chicago: Where are they now? No, we’re not talking about the music group and what Peter Cetera is up to. This is part of a new series of articles addressing the status of high profile hotel development projects that were delayed, abandoned, or faced some level of uncertainty due to the economic recession. Like numerous No. 1 draft picks in sports, many of the projects we investigated were introduced with much hoopla (and perhaps irrational exuberance), yet due to pure happenstance, never saw the light of day on a field. In other cases, projects struggled in their early form but gained new life with new teams that devised strategies to hone their true potential. We begin in the Windy City, where some of the tallest buildings in the United States were once planned, with each housing a luxury hotel component.
Chicago Spire
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Exterior rendering of the now vacant Chicago Spire development, courtesy of Chicago Spire. (Click to enlarge.) |
Chicago Spire was planned to house 150 floors, making it the tallest building in the United States. Announced as the Fordham Spire in 2005 by Fordham Development Company, the design initially had “just” 115 floors. The Spire’s site sits on Lake Shore Drive, just west of Navy Pier. After early struggles to obtain financing, Shelbourne purchased the site in July 2006 from Fordham with a loan from Anglo Irish Bank Corporation. Shelbourne revised the design to become the world’s tallest residential skyscraper. The structure was expected to house 200 condominiums and a 20-story luxury hotel.
Anglo Irish Bank provided Shelbourne with a US$77.3-million loan for acquisition of the site and initial development work. Site work began in mid-2007, but stopped a year later. Facing a collapse because of the financial crisis, Anglo Irish Bank was forced to stop funding construction. In 2009, the AFL-CIO considered bailing out the project with US$170 million to pay off the outstanding loans. However, the deal did not come to fruition. The loans fell into default as Shelbourne was unable to find debt to complete the US$1.5-billion development. After numerous attempts by Shelbourne to mount a legal fight to retain control of the project from Bank of America and Anglo Irish Bank, lenders finally won the right to foreclose on the project. In December 2010, the court appointed a receiver at the request of Anglo Irish Bank. The site currently sits vacant, save for the foundation and underground structure, which is mostly complete.
Shangri-La Chicago
Waterview Tower was planned to be a 90-story mixed-use project with 200 hotel rooms and 233 residences at West Wacker Drive and Clark Street. The hotel was to occupy floor 12 through 27. In October 2005, Shangri-La Hotels and Resorts announced that this would become the brand’s first U.S. property. The project also included a spa and fitness club, two restaurants, an indoor pool, and meeting space. The hotel was slated to open in early 2009.
Construction on Waterview Tower began in 2006. Seeing the debt markets highly aggressive in construction lending at the time, the developer, Teng & Associates, took the risk of proceeding with construction prior to securing a loan to cover the US$500-million project cost. In February 2007, LaSalle Bank provided Teng with a US$20-million bridge loan to fund initial construction until a larger loan could be secured. In 2007 and 2008, numerous banks were reportedly close to funding the project, including Fremont Investment & Loan, WestLB, and the Export-Import Bank of China. As the financing options dried up and available funds ran out, construction on the project halted in the summer of 2008. In March 2009, Shangri-La announced that it was pulling out of the stalled project. In 2010, creditors and lien holders took ownership of the development. The 26-story skeleton currently sits abandoned. Some day in the future, the project will likely e completed in the form of some modified alternative to the original plan.
Mandarin Oriental Tower Chicago
In June 2005, the Mandarin Oriental Tower Chicago was announced. It was expected to sit on Michigan Avenue in the Millennium Park neighborhood. Palladian Development acquired the site for US$27.2 million with financing provided by iStar Financial. The hotel was expected to occupy 15 floors of the 90-story mixed-use development. The project consisted of 250 guest rooms, 300 residences, four restaurants, two lounges, retail shops, and a spa and fitness facility, and function space, which included a 10,000-square-foot ballroom. The property was originally slated to open in early 2008.
Palladian began initial site work with additional funding from iStar Financial. However, as the residential sales slowed, Palladian was unable to secure enough debt to fund the full US$750-million project cost. After extending the initial loan term, iStar Financial finally filed for foreclosure on the site in February 2009 as Palladian was in default on US$43 million. The site currently sits vacant.