Reschke planning another LaSalle St. hotel

By Eddie Baeb, May 13, 2009

(Crain’s) — Developer Michael Reschke is doubling down on hotels in the Loop.

Mr. Reschke is close to a deal to bring a high-end boutique hotel that could have as many as 245 rooms to the historic Roanoke Building at 11 S. LaSalle St., sources say.

The new hotel, an Edition, would compete with a project Mr. Reschke has under way just two blocks south at 208 S. LaSalle, where the chairman and CEO of Chicago-based Prime Group Inc. is developing a 610-room J. W. Marriott hotel.

11. S. LaSalle St. Photo from CoStar Group Inc.

“I wouldn’t be building anything in this market,” says Brian Flanagan, president of Property Valuation Advisors, a Chicago-based hotel consulting firm. “For a corridor (LaSalle Street) that historically has not been a hotel corridor, it seems like quite a bit of supply. It just seems like a risky proposition at this point in time.”

The Edition brand was launched early last year with great fanfare by Marriott International Inc. and legendary hotel designer Ian Schrager, but its progress has been slowed by the recession and credit crunch, which has scrapped some hotel developments worldwide and in Chicago.

Timing and other details of Mr. Reschke’s plans couldn’t be determined, and he declined to comment. Sources say the hotel would be in the upper floors of the 35-story tower and include an outdoor garden terrace atop the low-rise portion of the building.

A Marriott spokesman says Edition executives have had discussions in Chicago with “many different parties” and hope to have a hotel here at some point, but didn’t have details. The brand had a deal for another Chicago location fall through just off North Michigan Avenue at 150 E. Ontario St., where another Chicago developer had hoped to build a new high-rise with a 330-room Edition and 20 upscale condominiums.

A hotel at 11 S. LaSalle is mentioned but not named in a prospectus filed earlier this month by Mr. Reschke’s new non-traded real estate investment trust, Prime Realty Income Trust Inc. The non-traded REIT seeks to raise $500 million from individual investors over two years to invest in distressed properties and real estate debt, such as first-position mortgages.

Related story: Reschke's return

The prospectus, which was filed with the Securities and Exchange Commission, has a section detailing Prime Group’s activities that says Prime is developing a “245-key luxury brand hotel” at 11 S. LaSalle, along with the J. W. Marriott and another boutique hotel in River North, a proposed 237-room Hotel Gansevoort at 508 N. State St., currently a surface parking lot just south of Rock Bottom Brewery.

Mr. Reschke bought the Roanoke Building in October 2006 for about $19 million. It was designed by Holabird & Roche in 1915 and designated a city landmark two years ago.

In fall 2007, he landed a $43.3-million loan to help pay for a $25-million renovation. Mr. Reschke at that time said he was planning to keep the Roanoke an office building and was counting on office tenants eventually paying higher rents.