Although it purchased the land for it for only $1, Loews Hotels has canceled plans to build a $175 million hotel at Block 37, a massive mixed-use development that's currently under construction in Chicago's Loop business district, Crain's Chicago Business reported earlier this month. The company, which was set to begin construction on the four-star, 384-room hotel next year, blamed the economy for souring its Chicago plans.
"Unfortunately, the lack of construction financing and the severe decline in hotel market dynamics have made it not viable to build a new luxury hotel," a Loews spokesperson said in a statement, according to Crain's.
Block 37, which has been planned—and mired with delays—for decades, eventually will feature offices, condominiums, shopping and hotel rooms, although only the offices are currently complete. The Loews hotel was supposed to be built above the project's retail component at Randolph and Dearborn streets; in exchange for selling the air rights for that space for just $1, Block 37 developer Joseph Freed & Associates LLC was to receive $12 million in tax-increment financing from the City of Chicago to offset cost overruns on the construction of a subway station beneath the project. Because the developer won't get that financing without a hotel, it's already in talks with other hotel operators that it hopes will fill the Loews void.
Despite the bleak economy, city officials remain optimistic that Freed will be able to secure a deal.
"Loews made its decision, but we do not think that applies to the whole industry," a spokesperson for the Chicago Department of Community Development told Crain's.
Added Chicago Mayor Richard M. Daley, according to the Chicago Sun-Times, "It's a good piece of property, Block 37. Right down the street is the Wit Hotel. They're breaking all records. So you know there's energy there."
Chicago, a contender for the 2016 Olympics, will find out on Oct. 2 if it has won the games. If it has, finding a replacement hotel for Block 37 could be critical to its success as a host city.