Oxford Capital buys out JV partner in Chicago redevelopment deal

LaSalle Hotel Properties has sold its 95% stake in a joint venture to redevelop part of the city’s IBM building into a luxury hotel. The $58.8m deal marks an $8m loss for the listed hospitality REIT.

Oxford Capital Group has teamed up with Hong Kong-based Langham Hotels International to take over the redevelopment of part of Chicago’s One IBM Plaza.

Chicago-based Oxford had originally partnered with hospitality REIT LaSalle Hotel Properties to convert part of the office property into a luxury hotel in 2008. The duo paid $46 million for the property, at 330 North Wabash Avenue, with LaSalle retaining a 95 percent stake in the venture.

IBM Building

LaSalle confirmed it had sold the JV project last month for $58.8 million, a price that resulted in an “impairment loss” of $8 million for the REIT. It declined to name the buyer, but a spokesman for LaSalle told PERE the sale was prompted by a desire to reduce the risk in LaSalle's balance sheet. He said the REIT had opted to invest its equity in acquiring cash-flowing assets rather than investing up to $120 million in a development deal with no ability to generate returns for two to four years. The redevelopment of the office space has been on hold since the first quarter of 2008.

In a separate release, Oxford Capital president and chief executive officer John Rutledge said the firm had relaunched the project with Hong Kong-based hospitality investment firm, Langham, in a bid to create Chicago's newest five star hotel. Langham is believed to hold a majority interest in the JV, while Oxford retains a minority interest. Oxford Capital was unavailable for further comment at press time.

The deal involves 375,000-square-foot of space over the second through 13th floor of the former property and part of the first floor. In 2008, Oxford said it planned to redevelop the vacant office space in the building into a 335-room hotel, together with 17,000-square-foot of conference space and a 9,000-square-foot restaurant.

Oxford said the hotel is expected to open in 2012 as the Langham Chicago Hotel.