The ongoing credit crisis is putting the brakes on a significant Chicago building project.
Chicago-based Strategic Hotels & Resorts, Inc. said it is scrapping plans to purchase the hotel development at the Aqua Building, currently under construction and adjacent to the company's Fairmont Chicago Hotel.
"Despite the opportunities this property presents, the financial markets and economic operating environment have changed significantly since we first entered into the agreement to purchase the space in 2006,'' said Laurence Geller, president and chief executive of Strategic. "We remain committed to our thoughtful and disciplined business approach which, given the higher cost of capital, escalating total project costs and our dedication to maintaining sufficient liquidity for all market conditions, makes it imprudent for the company to proceed at this time.''
The company expects to take a $36 million charge in the third quarter. That includes the loss of $28 million in the form of a letter of credit to obtain the contract and roughly $8 million in planning and development costs. As a result, capital expenditure needs will be reduced by approximately $100 million.