Tall & Urban News

After buying a pair of historic Chicago properties and the city's Major League Soccer franchise, Joe Mansueto is making another high-profile purchase: The Waldorf Astoria Chicago hotel.

In a deal that completes a major financial haircut for a pair of lenders that took control of the property last year, the billionaire Morningstar founder has a deal to pay around US$54 million for the 215-room luxury hotel at 11 E. Walton St., according to sources familiar with negotiations.
 
The pending transaction would be one of the first Chicago hotel sales since the COVID-19 pandemic began and demonstrates the decimation of hotel property values during the worst crisis the modern hospitality industry has ever seen. Hotel owners have been pushed to the financial brink with travel sapped and little clarity about when the pandemic will subside, leading to what could be a tidal wave of distressed properties ripe for purchase at huge discounts compared to their pre-COVID values.

In the case of the Waldorf, the distress pre-dated the coronavirus. A debt fund controlled by Chicago-based real estate investment firm Walton Street Capital took ownership of the hotel late last summer from a venture of Chicago hotelier Laurence Geller and Wanxiang America Real Estate Group through a deed-in-lieu of foreclosure. The Walton Street fund was a junior lender on the debt the Geller venture took out to finance its US$111.9 million acquisition of the hotel in 2015—then a record high price paid for a Chicago hotel.

Walton Street, which co-owns the Thompson Chicago hotel nearby, sought to stabilize the Waldorf by revamping operations to capitalize on several years of record-setting tourism in Chicago. But then came COVID-19.

Now its fund is poised to unload the 60-story hotel in a sale that would not only wipe out all of its equity in the property but also roughly 20 percent of a US$67 million senior loan on the building owned by Wells Fargo, according to public records. The exact value of Walton Street's piece of the debt is unclear, but sources familiar with the offering said the total debt on the property was more than US$90 million. 

A spokesman for Walton Street couldn't be reached and a Wells Fargo spokesman did not provide a comment. Wells Fargo is providing the debt for Mansueto's acquisition, and Chicago-based Lodging Capital Partners is also a minority investor in the venture, sources said.
    
For Mansueto, the purchase adds to a Chicago real estate portfolio he kicked off in 2018 with a US$255 million acquisition of the Wrigley Building and US$106 million deal for the 297-unit Belden-Stratford apartments, a 16-story Beaux-Arts building overlooking Lincoln Park.

"The things I've invested in kind of align with a passion of mine around design and preserving the past. These are historically significant buildings," Mansueto told Crain's in an interview last year.

While he bets on the downtown office market, Mansueto is also expanding his real estate interests into one of Chicago's disinvested West Side neighborhoods. In partnership with Chicago-based developer IBT Group, Mansueto is beginning work on a US$50 million plan to redevelop a cluster of former warehouses at 1334 N. Kostner Ave. in West Humboldt Park into creative office space. 

That project, dubbed "The Terminal," is in line with Mayor Lori Lightfoot's US$750 million Invest South/West initiative to reshape blighted commercial corridors on the city's South and West Sides. Lightfoot is scheduled to appear with Mansueto Nov. 9 at an event to kick off construction on the project.

With a net worth of US$4.8 billion according to a recent Forbes estimate, Mansueto owns a New York-based company that publishes Fast Company and Inc. magazines and diversified his investments in a big way last year with the purchase of the Chicago Fire FC MLS franchise.

For more on this story, go to Crain's.