Tishman forces Marriott to buy Chicago Sheraton

NATIONAL REPORT -- New York-based Tishman Realty has exercised an option to sell the 1,218-room Sheraton Grand Chicago Riverwalk hotel to Marriott International for $500 million.

The sale is transpiring based on the settlement of a 2017 lawsuit between the two parties when Marriott acquired Starwood Hotels in 2016. Tishman alleged that the deal put a nearby Marriott property in direct and unfair competition with the Sheraton. The right to force a sale was part of the settlement.

Marriott is paying $300 million for the property’s leasehold and an additional $200 million to buy the ground underneath the hotel. Tishman, which developed and has owned the property since 1992, had separated the ground from the building and struck a ground lease between the two entities that owned the hotel and the land, according to credit ratings agency Morningstar, which last year also valued the property at $270.5 million.

During Tuesday’s 4Q23 earnings call, Marriott CFO Leeny Oberg acknowledged that the $500 million is “cash out the door that we expect to occur in Q4 2024.” She further explained that $200 million relates to the purchase of the underlying land, which will be considered as capex. “A lot of the rest reflects a liability that we established on the balance sheet, frankly, years ago as part of the transaction. So, it does obviously impact our available cash for the year.”