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Blackstone Hotel owners land big refinancing in a crowded market

Sage Hospitality CEO Walter Isenberg (left) and Fundamental Advisors CEO Laurence Gottlieb with the Blackstone Hotel at 636 South Michigan Avenue

Sage Hospitality CEO Walter Isenberg (left) and Fundamental Advisors CEO Laurence Gottlieb with the Blackstone Hotel at 636 South Michigan Avenue (Credit: Sage Hospitality, Blackstone Hotel)

The owners of Blackstone Hotel in the South Loop have refinanced the historic property — and at a time when the Chicago hospitality market is strong and growing more competitive.

The $52 million loan from Apollo Commercial Real Estate Finance for the 332-key hotel at 636 South Michigan Avenue was signed by Jason Altberger, chief investment officer at Denver-based Sage Hospitality.

In March 2016, New York-based Fundamental Advisors bought a stake in the hotel, Crain’s reported at the time. County records showed Fundamental invested $57.5 million, but the size of the stake it secured was unclear.

Representatives of Sage and Fundamental did not immediately respond to a request for comment Wednesday morning.

Sage spent some $128 million to renovate the hotel in the 2000s, though an investor told Crain’s it bid just $70 million for the property at the time Fundamental bought into it.

Sage’s local portfolio also includes The Ritz-Carlton Downtown, along with DoubleTree by Hilton locations in suburban Schaumburg and Wood Dale.

The Chicago hotel market has enjoyed a resurgence recently, as Downtown hotel room prices bounced back in 2018. Operators seized on record tourism to fill up space even as some 1,500 new rooms came online.

Chicago’s average revenue per available room, a metric that measures hotel income against room vacancy, jumped nearly twice the average in the nation’s top 25 markets.

The city saw more than 57.6 million visitors last year, beating its 2017 tourism record by 4.3 percent, according to Choose Chicago. That, combined with the city’s convention business, “blew the doors off” the hotel market last year, one consultant said.

But the field is expected to get even more crowded with more than 2,000 rooms slated to open this year. The red-hot Fulton Market neighborhood has contributed to the surging inventory, as new properties, including the recently opened Hoxton Hotel, give other Downtown properties more competition.

Still, that hasn’t scared away developers. Convexity Properties just last week announced plans for its fourth hotel in Chicago, a 307-key property in the Loop.

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