Radisson paying $125 million for posh new brand in downtown Chicago high-rise

New luxury Radisson planned for Chicago high-rise

Radisson is paying $125 million to build the first North American hotel in its signature upscale ‘Blu’ line on 18 floors of a splashy Chicago high-rise, company officials said Wednesday.

The move is part of parent company Carlson Hotels Worldwide’s $1.5 billion strategy to revitalize the chain in America and expand in five years from roughly 1,000 owned and franchised hotels to at least 1,500 across several brands.

The space was originally reserved to expand the adjacent Fairmont Chicago, but Strategic Hotels and Resorts backed out after the meltdown, writing off a $28 million down payment and some $8 million in development costs.

Similar problems and record loan delinquency rates elsewhere in the recession-battered lodging industry have sent investors searching for cheap, distressed assets and set expectations high for a busy shopping season.

“For investors at this point the perception is there’s really no downside, there’s only upside,” said Daniel H. Lesser, senior managing director at the real estate tracking firm CB Richard Ellis.

About half the $125 million cost will pay to develop and furnish the guest rooms and common areas. The other $62.5 million secures Radisson’s joint ownership of the Aqua tower with Magellan Development, which will handle the 63 other floors containing condos and apartments.

That makes the buy one of the year’s most expensive, behind only three other single-property deals — the $200 million Tropicana Casino and Resort in Atlantic City, N.J.; the $112 million Hyatt Regency Boston and the $95 million Sofitel Washington, D.C., according to CB Richard Ellis data.

And all of those properties are already, designed, furnished and taking guests. The Radisson Aqua Blu won’t be ready until fall 2011.

But Radisson executives weren’t scrounging for a deal. Besides a contemporary makeover, they promised luxurious showpieces in major U.S. cities to woo would-be guests.

They’ll certainly draw attention in the new Aqua tower, offering sweeping views of the city from varied-length balconies that create a distinct, undulating facade.

“It’s one thing to talk about strategy; it’s another thing to actually do it,” Carlson CEO Hubert Joly told The Associated Press. “This clearly gives us momentum. The phone is now ringing quite significantly, and people see us as a real player.”

Privately held Carlson is based in Minneapolis.