September 13, 2011

Schrager Makes Over a Legendary Chicago Hotel

By ROBERT SHAROFF

CHICAGO — Ian Schrager, whose indefatigable pursuit of buzz over the last 30 years has produced memorable hotels

like the Royalton and the Gramercy Park in New York, the Mondrian in Los Angeles and the Delano in Miami Beach,

is about to open his first new project as an independent hotelier since the 2008 financial crash.

Mr. Schrager’s new venture — which will have a limited opening here on Thursday — is Chicago’s faded but legendary

Ambassador East Hotel.

“I’m in an opportunistic business,” he said on a recent walk-through of the hotel’s public spaces. “You can’t have a

hotel company without having a hotel in Chicago. I’ve always wanted one, but never found one to buy until now.”

The hotel, which Mr. Schrager is calling the Public, dates from 1926 and is about a mile north of the Loop central

business district in the Gold Coast lakefront residential neighborhood.

Mr. Schrager acquired the Ambassador East in the spring of 2010 for $25 million from the Harp Group, a locally

based hospitality investment and development firm that paid $44.5 million for it in 2005. Harp Group’s lender, iStar

Financial of New York, retains an interest in the project.

“Basically, it turned out to be an arranged short sale,” said Adam McGaughy, a senior vice president of Jones Lang

LaSalle and Harp Group’s broker for the transaction.

He added: “It was very good timing for Schrager. At that point, no one knew what was going on in the market. The sky

was still falling. He timed it just before the market for investment recovered later that summer.”

Since then, Mr. Schrager has spent $35 million on the renovation. When added to the purchase price, the total is

about $60 million, or just over $200,000 a room, an ostensible deal in a city where luxury hotel properties regularly

trade in the range of $300,000 to $400,000 a room.

And in contrast to other properties that Mr. Schrager has developed, room rates will also be something of a bargain.

The Public has 285 rooms, about 30 percent of which are suites. Rates, at least in the beginning, will start at $135 a

night, considerably below the average for the downtown Chicago luxury market.

Downtown Chicago has about 34,000 hotel rooms with overall occupancy expected to reach 71 percent this year.

“The whole idea is there has to be value,” Mr. Schrager said. This means, he added, “No $5 Hershey bars in the

minibar and no $20 pots of room service coffee. People won’t accept that anymore.”

He described the Public as “a paradigm shift.”

“The idea is to have a less expensive hotel where you still have great service, great design and an exciting food and

beverage concept,” he said. “Because I think the country’s more complicated now. It’s not going to be so much about

upward mobility in the future.”

Mr. Schrager says he hopes the Public will be the first link in a new chain of boutique hotels across the country.

This is his second try at creating a boutique hotel chain in recent years. The first was a star-crossed collaboration with

Marriott International for a chain called Edition, which was announced with much fanfare in 2007 but has resulted in

the opening of only two hotels, in Honolulu and Istanbul.

Even though the Public’s room rates will be lower than a typical Schrager property, Mr. Schrager said he was not

skimping on design, which has been his calling card and a way of compensating for the small room sizes and cramped

bathrooms that he acknowledges are a fact of life in many vintage hotels.

“I’m able to take compromised conditions and, through good design, neutralize them,” he said.

But those who remember outré touches like the giant log that served as a couch in the lounge of the Hudson Hotel in

New York may be surprised by the overall restraint of the Public.

“It’s not design on steroids,” said Anda Andrei, Mr. Schrager’s in-house architect for close to 30 years. “We wanted to

keep a lot of the history there because the bones are so beautiful. It’s understated in a way but at the same time

glamorous, because there is a certain glamour to clean, beautiful design.”

The one area of the hotel where some of Mr. Schrager’s characteristic outrageousness comes into play is the storied

dining room, the Pump Room.

In the days when cross-country train travel inevitably involved a layover in Chicago, the Pump Room was the local

equivalent of New York hot spots like the Stork Club and El Morocco.

“A lot of visiting celebrities liked to go there and the next day you would read about them in the gossip columns,” said

Tim Samuelson, the City of Chicago’s cultural historian. “The Pump Room always had an edge of coolness to it.”

Two early fans were Frank Sinatra and Judy Garland, both of whom incorporated references to the Pump Room into

their respective versions of “My Kind of Town” and “Chicago.” (Sinatra’s favorite booth in a sheltered alcove toward

the back has been preserved.)

The reconfigured Pump Room is dominated by what Ms. Andrei calls “the constellation,” an elaborate overhead

lighting system of dozens of resin globes attached at various points to what appears to be a steel jungle gym

suspended from the ceiling.

Mr. Schrager has teamed up with a celebrity chef, Jean-Georges Vongerichten.

“The food will be very simple: a blend of what’s popular in New York and four or five classic Pump Room dishes,” Mr.

Vongerichten said. “It’s really about keeping affordable prices. Some main courses will be under $20. Most will be

between $17 and $28. We’ll have something for everyone.”

One potential drawback for the Public is its location, which is at the northern edge of the downtown area.

“It’s a challenging location because it’s north and residential,” said Ted Mandigo, the director of TR Mandigo &

Company, a hospitality consulting firm in Elmhurst, Ill. “But that also is part of the charm of the property. You pull up

and it’s a shady street and the people you see on the sidewalk are the people who live around there.”

Mr. McGaughy of Jones Lang LaSalle agrees.

“It’s not on Michigan Avenue and it’s not within two blocks of all the corporate activity,” he said. “But I think the kind

of savvy travelers Schrager will be targeting will understand the location.”