By Thomas A. Corfman, Chicago Tribune
Mar. 4--Troubled hotel owner Wyndham International Inc. is shopping its deal to develop a Michigan Avenue luxury
hotel as part of the $500 million North Bridge project.
Saddled with billions of dollars of debt, the Dallas-based company is looking to sell its 50 percent stake in the
$85 million hotel under construction on the site of the McGraw-Hill building, 520 N. Michigan Ave., real estate
industry sources say. Wyndham's partners in the project are North Bridge's developers, Chicago developer John Buck
Co., and New York investment bank Morgan Stanley Dean Witter & Co.
The hotel's opening -- originally scheduled to coincide with the Sept. 22 opening of the Nordstrom Inc. department
store that anchors the North Bridge development-- has been pushed back until early 2001. Any sale of Wyndham's
interest would also include the rights to operate the hotel, which was going to be run under the company's "Grand
Bay" brand name.
Several luxury hotel operators names have expressed interest in the property, sources say, including Mandarin Oriental
Hotel Group International Ltd., Carlson Cos.' Regent International hotels and Starwood Hotels & Resorts' St.
Regis luxury chain.
Any deal would have to be approved by Wyndham's partners, who would veto any change that would convert the property
into a mid-price or extended stay hotel.
A Wyndham spokesman declined to confirm the potential sale. Greg Merdinger, a Buck Co. principal who is directing
the North Bridge project, would not comment.
Wyndham's asking price could not be determined. The project is financed with a $50-million construction loan from
Boston-based Fleet National Bank, records show.
For a couple of reasons, Wyndham's stake might be appealing to a potential buyer. Since the deal was put together
in late 1997, hotel financing has become more difficult to obtain, said Scott Steilen, a hotel consultant for E
& Y Kenneth Leventhal Real Estate Group. And a buyer stepping into the project now would realize a quicker
return on the investment than starting a hotel project from scratch.
Still, concerns about an oversupply of hotels rooms could reduce the value of Wyndham's stake. "In 1997, you
could have sold the development at a bigger number than you can today because 3,000 new hotel rooms have been added
... since then," Steilen said.
The luxury hotel that Wyndham once contemplated now faces strong competition from two five-star projects under
construction near the corner of Michigan and Chicago avenues: the 340-room Peninsula Hotel atop the retail complex
at 730 N. Michigan Ave., and Hyatt Corp.'s 192-room flagship hotel next door to the Water Tower.
The Grand Bay in Chicago was planned as part of a new line of high-end hotels owned by Patriot American Hospitality
Corp., a high-flying Dallas-based real estate investment trust brought to earth by its own debt. As part of its
1999 financial restructuring, the company changed its name to Wyndham and abandoned plans to build up the fledgling
Grand Bay brand.
The company operates a 417-room Wyndham hotel at 633 N. St. Clair St., just three blocks from the McGraw-Hill building.
With the Grand Bay line no longer a priority, unloading its share in the development deal is consistent with the
company's new plan. "To raise cash, they are selling non-core assets, such as older properties and non-Wyndham
properties," Steilen said.
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