Hotel Backs Out Of Block 37

By Marcus Gilmer in News on Sep 14, 2009 3:40PM

It's been an up-and-down year for Block 37, from the Apple Store debacle to landing a few high-end tenants. And a Sunglass Hut. The roller-coaster ride continues as Loews Hotels has backed out of an agreement to bring a four-star, 384-room to the project. Loews had bought the rights to the property for $1 and was still seeking financing for the $175 million project, which would have started construction next year for a 2013 opening. According to Crain's:

Loews would have built its hotel at Randolph and Dearborn streets, on air rights above the four-story retail base of the Block 37 development. The hotel deal's collapse also creates a hole in the budget for a project that has been hit by cost overruns and construction delays.

In exchange for selling the air rights for $1, Block 37 developer Joseph Freed & Associates LLC would have received $12 million in additional tax-increment financing from the city. That money was supposed to offset cost overruns on the construction of a Chicago Transit Authority station underneath the project, but it now sits in an escrow account awaiting the next deal.

With the current market, some experts are doubtful the project can find a suitable replacement, but a spokeswoman for the Chicago Department of Community Development remained optimistic, telling Crain's, "Loews made its decision, but we do not think that applies to the whole industry." The project expects to announce more tenants later this week for the retail part of the project, which is now expected to open in November.