Graduate Hotel coming to EvanstonThe college town-centric brand is setting up in a historic building off the Northwestern University campus.
Tuesday, October 08, 2019
Crain's Chicago Business
by Danny Ecker
A Chicago developer that's quickly expanding its chain of college town-centric boutique hotels is moving into Evanston.
AJ Capital Partners last week bought the historic 91-room Homestead apartment building and hotel just off the Northwestern University campus, which it will renovate and rebrand as the Graduate Evanston hotel, the company announced.
The eight-story property a few blocks from Lake Michigan at 1625 Hinman Ave. becomes one of 13 new Graduate locations in the works, adding to the 20 AJ Capital has already opened nationwide in cities with major college campuses since launching the brand in 2014.
Those projects are all in the same vein: Updating university-anchored, older hotel properties with new designs that reflect the culture and history of the town and school nearby.
Plans for the Homestead are no different, said AJ Capital Chief Investment Officer Tim Ryan. The developer will pour upwards of $13 million into the 42,000-square-foot building, which opened in 1927 and is listed on the National Register of Historic Places.
The end result, slated to debut in fall 2020, will include updates to the building's public spaces and facade, as well as more than 100 guest rooms reconfigured from the mix of hotel and apartment units there today.
It's a bet on the continued strength of the local hotel market in the face of property taxes that could surge under a new valuation system implemented by Cook County Assessor Fritz Kaegi, likely placing a larger tax burden on commercial properties than in the past. Many Evanston commercial property owners saw huge spikes earlier this year in the assessed value of their properties. For hotel owners, those could translate into larger tax bills that eat away at their bottom line.
Bringing the Graduate brand to Northwestern was "kind of a no-brainer," Ryan said, adding that AJ Capital had considered it for some time.
"It's so us," he said. "We're super excited the seller decided to sell, and after talking with many suitors (the seller) got to know us and our approach and ultimately entrusted us with being faithful stewards of the property."
Ryan declined to disclose the sale price. AJ Capital bought the Homestead from a venture led by local investor David Reynolds, which bought the Homestead in 1992. The building last year generated net operating income of $158,206, according to a brochure from Essex Realty Group, which was marketing the property on behalf of the Reynolds venture.
Ryan expects the Graduate Evanston will draw plenty of business from university events and traveling professors looking for longer-term stays. But he's also banking on leisure travelers looking for "experiential-focused travel" who want to feel like they are immersed in the feel of the Evanston community when they are there, the same reason visitors choose to stay in an Airbnb or other non-traditional short-term rentals.
"It's tapping into a psychographic rather than a demographic," he said. "It's people that are out here to have a fun experience, have a nice time and stay some place that is memorable as opposed to forgettable."
AJ Capital also plans to set up a new restaurant and cafe on the Homestead's ground floor, replacing the Hearth Restaurant that had operated there for several years. That 4,000-square-foot space was previously home to Trio, famous as the previous kitchen of renowned chef Grant Achatz.
AJ Capital Partners—the AJ stands for Adventurous Journeys—was founded in 2008 by Ben Weprin, a former real estate broker whose development firm has made its name in Chicago with a series of trendy hotels. The firm was a co-developer in 2012 of the Soho House hotel and private club in the Fulton Market District, a renovated manufacturing building that help set off the neighborhood's transformation into a destination for corporate giants and upscale hotels and restaurants.
Weprin's firm, which has now grown to about 100 employees, is also behind the Chicago Athletic Association hotel on Michigan Avenue, and the redos of the Thompson Chicago hotel in the Gold Coast and the Hotel Lincoln in Lincoln Park, which it sold in 2016.
AJ Capital set out to expand the Graduate brand after a $500 million infusion from Hong Kong-based investor Gaw Capital Partners. The brand is on track to have 22 locations running by the end of this year and next year plans to add its first property outside the U.S., in the United Kingdom at the University of Cambridge.
AJ Capital last year closed a second round of funding from a group of foundations, wealthy individuals and institutional investors that brought the firm's total investment pool to $1.5 billion, according to a spokeswoman.