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Emanuel, Quinn, McPier tout McCormick hotel, but deal’s not done

A 1200-room hotel is planned for McCormick Place.

A 1,200-room hotel is planned for McCormick Place.

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Updated: March 21, 2013 6:43AM

The agency that owns McCormick Place made news Tuesday about wanting to build a hotel that will increase by 50 percent the number of guest rooms within walking distance of the city’s convention center. Will it happen? Probably, but it was hard to judge through all the posturing.

There was posturing from McPier, the Metropolitan Pier and Exposition Authority, posturing by the mayor, posturing by the governor and even by the owner of the land involved, who pointedly observed that he has not agreed to sell it.

And it appears the negotiations over the property aren’t going well. Otherwise, why would the office of Mayor Rahm Emanuel, working with Gov. Pat Quinn and McPier, issue an announcement of the hotel plan at about 6 a.m., timing that gave it the authenticity of breaking news?

It was a great technique if the aim was to pressure the owner, an affiliate of James McHugh Construction Co., into selling. With the top politicians on board, the announcement carried the implied threat to McHugh that if he doesn’t come to terms, his land will be condemned and eminent domain will come into play.

The hotel — about 35 stories tall — would contain 1,200 rooms and be built on the south side of Cermak between Michigan and Indiana. It will be directly across from the McCormick Place West Building and have a skybridge connection to it, McPier said.

The agency’s chief executive officer, Jim Reilly, mentioned the condemnation option in discussing the land sale. “We’ve been in negotiations with them and hope it will come to a friendly conclusion,” Reilly said. He described the talks as “serious.”

James McHugh, chairman of the construction firm, responded with a statement that “we considered those conversations to be very preliminary and no agreement has been reached. It is our hope that the issue can be resolved in a way that improves the ongoing redevelopment of the South Loop.”

McHugh said that a company he runs, JRM Technology, has invested “millions of dollars” to develop a data center on the site McPier wants. The plan has gotten City Council approval and McHugh said he would start construction as soon as a building permit is issued.

In other words, everybody wants leverage for a high-stakes land deal. Reuben Hedlund, an attorney with long experience in land use issues, said the public pronouncements here have the same purpose. “I think it’s probably a negotiating strategy because using eminent domain or condemnation can take so long,” he said.

“Everybody is taking a position here to get the best deal possible.”

I circled back to City Hall for any information on how badly it wants the McHugh site, and got a statement from Steve Koch, the investment banker Emanuel named last year as deputy mayor to handle nitty-gritty business like this. Koch underscored the city’s resolve.

“This project is moving forward. We are in active negotiations with McHugh and there are a number of options that will allow both the data center and world-class hotel to be built,” he said. “However, the city will pursue every available option to ensure that the hotel is built, and brings with it essential redevelopment around McCormick Place, as well as 2,500 construction jobs and 500 permanent jobs.”

One possibility, Reilly said, is a land swap that will let McHugh build his data center nearby.

McPier estimates the hotel will be a $400 million project, payable from its existing authority to issue revenue bonds. Some will ask why a government agency has to start the deal when private developers probably would be interested, but putting more hotel rooms near McCormick Place has long been a civic priority. McPier appears determined to control the pace and scale of that development.

It also is arguable whether using condemnation powers to build a hotel is a correct use of a power that’s supposed to support the public interest. But that’s a theoretical case that won’t see the light of day here.

Hedlund said he bets McPier will reach terms with McHugh. The price, he said, will balance several factors, including the reality that McHugh’s land is much more valuable for a hotel than for a data center.

And there is other property next to McCormick Place that could become a hotel site. It’s north of Cermak and east of Indiana, but it’s been tied up in foreclosure and bankruptcy. The McPier announcement could cause the warring parties there to come together and we could suddenly have a race to build the next convention-sized hotel.

Reilly said he hopes the McPier hotel will be under construction by late 2014 and open a couple years later. It sounds like a long way off, but it’s not, as the agency still has to issue proposals to builders, architects and others.

And there’s a small matter of a property sale standing in the way.

David Roeder reports on real estate at 6:22 p.m. Thursdays on WBBM-AM (780) and WBBM-FM (105.9). The reports are repeated at 10:22 p.m. Thursday and 7:22 a.m. Sunday.

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