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CHICAGO-Even though Donald Trump is among the players in the local hotel condominium market, Strategic Hotels & Resorts sees a still untapped market, and hopes to begin selling units in at least one of its Downtown holdings before the end of the year. The REIT will test the market by attempting to sell up to 156 units at the Fairmont hotel overlooking Millennium Park as condominium and fractional ownership units.

“Our market research has indicated that despite the growing number of for-sale condominiums in the Chicago market, there may be a separate demand for fractional ownership within the context of the full-service, branded, luxury hotel format,” says president and chief executive officer Laurence S. Geller during his company’s recent earnings conference call. The test marketing at the 692-room Fairmont, which the company acquired for $158 million earlier this year, will include an equal number of condominium hotel units that will be models for new Gold rooms in the rest of the property at 200 N. Columbus Dr., and fractional ownership units that will be two-bedroom apartments.

If the test marketing is successful, Strategic Hotels & Resorts could sell up to eight entire floors under the condominium and fractional ownership concepts. “If it’s not successful, the downside is we have a great two-bedroom apartment unit to offer,” Geller says.

Further west, Strategic Hotels & Resorts hopes to replace the north tower of the InterContinental with a 71-story building that will include 310 condominiums in addition to 150 hotel suites as well as 11,000 sf of new Michigan Avenue retail space. “We believe there’s a real opportunity to take advantage of a large and strong residential premium for Michigan Avenue condominiums, particularly on the higher floors,” Geller says.

The company will likely sell air rights to a developer, who would built the new tower after landing financing, Geller says. “We’re not a high-rise residential developer, and we’re not in the business of taking high-rise residential development risk,” Geller says. If the company does not proceed with its InterContinental plans, it will have zoning in place to pass on to a new owner, he adds.

The remaining 330-room hotel, built in 1928, would remain but undergo renovations to reposition the rooms for the luxury market, company officials say. Lucien Lagrange Architects has been hired to design the new InterContinental tower while Rockwell Group is working on designs at the Fairmont hotel.

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