Ambassador East

CHICAGO-Ian Schrager Co. has purchased the 285-room Ambassador East hotel, an 84-year-old icon that includes the famous Pump Room restaurant. Schrager, a well-known hotel developer from New York City, tells that it will likely take almost two years and a few million dollars to renovate the property.

He says he’s not sure about keeping the name, but out of respect to the people of Chicago, he will “probably be inclined to do that. I don’t want to be the typical New York person coming in to remake a property. You can’t have a successful hotel unless local people embrace it,” Schrager says. He bought this site, his first Chicago property, for its history, its presence and because he believes in the city, he says. “I don’t think you can have a real hotel company and not have a hotel in Chicago,” he says. He has other ties, his wife is from the city.

The property almost didn’t stay a hotel. A former venture of the Fordham Co., Mid-America Development Partners LLC and the Harp Group bought the building from the Dallas-based Omni hotel chain in early 2006 for $44.5 million, and had planned to spend another $10 million to convert the property to condos. The units, which were to sell from $275,000 to $1.4 million, were never created.

Sources say Schrager’s purchase price was about $28 million, with iStar providing financing for the deal in exchange for profit sharing. Sources also say the estimated cost for redevelopment is $15 million. However, Schrager tells that these reports are “inaccurate.” He would not discuss financial terms, and though he says he canceled plans for a venture for the property, he “there is a possibility to bring in a partner at a later date.”

Some people may say the building its past its prime, or too far removed from the main drag of the Magnificent Mile, State Street or new popular areas just north of the Chicago River, Schrager says. “I don’t look at it like that. I love the asset. We can bring great value to this development,” he says. His company will now start a seven-to-nine-months planning phase, followed by a year-long renovation, with an opening probably in 18-to-22 months, Schrager says.