Introduction

      The Shangri-La Hotel and its signature Chi Spa are to be housed in the 90-story Waterview Tower under construction at the corner of LaSalle and Wacker streets in Chicago, Illinois.  The project is being developed by the engineering firm Teng & Associates, marking the first time this company has taken on the role of lead developer of a hotel or skyscraper. The hotel portion of the development will occupy the lower 12th through 27th floors, with the remainder of the building devoted to standard residential condominiums. 
     All of the hotel rooms are to be pre-sold as “condominium hotels”--a class of real estate that traditionally refers to any arrangement where residential units are purchased by individual buyers, and become rented to the public as hotel rooms when the owner is absent.
     If you have done some of your own research, you may be thinking about the positive fundamentals that are driving up hotel profits in most major markets, such as Chicago. Indeed, it would seem that the developer of Shangri-La views these prevailing trends as evidence enough that their hotel condominiums are a strong buy. However, with Goldman Sachs recently forecasting “low returns on new hotel builds,” ¹ investors should make sure they get the complete picture before they make the leap
into the hotel business.

Note