The deal involves the redevelopment of a building that was previously the headquarters of MB Financial Bank, but which has stood empty for more than a decade as the area around it has changed dramatically. The Neighborhood Hotel company, which launched its first location in Lincoln Park in 2020, plans to convert the upper floors of the West Loop property into 80 apartment-style hotel units, by far the company’s largest project to date, has said Neighborhood Hotel CEO Jonathan Gordon. .
“The business plan is to offer a well-equipped base camp designed for travelers to immerse themselves in a neighborhood, with all the comforts of a vacation rental but the quality of a hotel,” said said Gordon. “This is a special building and one of the last historic assets in the West Loop” that has yet to be redeveloped.
In addition to the Lincoln Park location at 2616 N. Clark St., Gordon has opened a neighborhood hotel outside of New Buffalo, Michigan, redevelops the former National Italian-American Sports Hall of Fame in Little Italy into a 35-unit hotel and recently purchased another property in downtown New Buffalo for another location.
But none of these projects are as ambitious as 801 W. Madison. Gordon plans to renovate the building’s long-untouched office floors into hotel units with full kitchens, washers and dryers.
Current zoning allows for a hotel on the property. The company will seek a Class L property tax designation from Cook County to move forward with renovation, a program that lowers the assessed value of a historic property – thereby lowering its tax bill – on a 12-year period after a developer invests heavily in restoring it. Gordon projects this process and interior work will put the hotel on track to open in early 2025.
Gordon is counting on the downtown hotel market, battered by COVID-19, to fully recover from the pandemic by then. Although business travel has yet to return to pre-COVID levels, strong leisure demand in the city in recent months has brought average hotel occupancy back close to its 2019 level.
Gordon is also betting that more visitors will prioritize his type of hotel over large hotel chains, whose loyalty programs are usually very attractive. Visitors to Neighborhood Hotel properties access rooms by passcode, access 24-hour concierge service via text, and can opt-in for turndown service during their stay, which is provided by a housekeeping company third party.
“Clients are changing their preferences and looking to stay in assets like ours,” Gordon said. “They understand that they don’t need a 4:1 ratio of hotel employees to guests… But they also appreciate business-grade Wi-Fi and find it more rewarding to be in a residential setting rather than a traditional glass-steel tower with a hotel.”
To date, the average length of stay at a neighborhood hotel is five days, with 55% of bookings coming directly from the company’s website and the rest through short-term rental websites Airbnb and Vrbo.
Gordon launched the Neighborhood Hotel brand after working for years in the office industry, first as a broker representing companies negotiating downtown office leases, then at Equity Commonwealth, an investment trust Chicago-based real estate led by Sam Zell. Gordon quit as asset manager after Equity Commonwealth sold most of its properties in recent years, launching the Neighborhood Hotel after initially raising capital from more than two dozen investors.
Gordon said he aims to reach 750 rooms in the neighborhood hotel portfolio over the next five years.
The 801 W. Madison building became a Chicago landmark in 2012, joining a long list of former neighborhood bank buildings that the city began designating as landmarks five years earlier. The West Loop building was built in 1911 and remodeled in 1928 to add a new exterior and remodel a large banking hall on the first two floors. The building is now flanked by a Mariano grocery store and luxury apartment buildings, and is around the corner from a Whole Foods.
Armando Chacon, president of community group West Central Association, called the bank building redevelopment project “extremely important” and a great addition to a $2.9 million city-funded streetscape project. dollars to Madison Street which will include speed bumps, sidewalk improvements and pedestrian islands, among other new features.
“It’s frustrating to see this building sit idle for so long. Knowing that it’s coming back to life is just remarkable,” Chacon said. “It’s kind of the gem of the street, and the fact that (Madison’s) front door has been decaying for so long has been really unfortunate.”
CBRE Senior Vice President Marcello Campanini negotiated the sale of the property to the neighborhood hotel.