Liening on a Landmark

CHICAGO The hotel is finished. But millions of dollars remain unpaid to tradesmen who did the work.

The old Blackstone Hotel is where the phrase "a smoke-filled room" was born. During the political convention of 1920, cigar-chomping Republicans met in a ninth floor hotel room to finagle a candidate through the haze of their own smoke.

It seems fitting then, that as the new Blackstone Hotel wows patrons, behind the scenes is a story of politics, power and millions of dollars.

Chicago Mayor Richard M. Daley did the honor of officially reopening the century-old historic hotel in late April and fulfilling part of his father's dream to make the South Loop as beautiful as the North Side.

"It is not only a grand hotel, but it also has the heart and soul of the history of the city of Chicago," Daley said.

And the mayor made sure the grand hotel also had some money from the city of Chicago - $18 million in tax-increment financing to help rehab the Blackstone. But the I-Team has learned that Chicago officials are refusing to pay out the remaining $10 million because of a contractors' fight over the final bill.

"We spent over $100 million restoring it to its original grandeur," said Walter Isenberg, Sage Hospitality.

Six months after restoration was finished by the hotel owner, Denver-based Sage Hospitality, there is a bitter financial feud between the firms that actually did the work. The general contractor McHugh Construction and more than a dozen subcontractors - from the demolition crew to plumbers and electricians - have all filed liens on the property, claiming they haven't been paid for all the work they did.

According to documents filed with the Cook County recorder of deeds, McHugh, one of the city's most prominent, politically-connected construction companies, says it is owed almost $12 million. Better Government Association executive director Jay Stewart says big companies like Sage and McHugh have deep pockets and will survive but that the little guys take a beating.

"Of all of the folks involved, the subcontractors are probably the hardest hit," Stewart said.

None of the subcontractors would appear on camera, frightened they would lose future work.

However, one contractor told the I-Team he fears the financial hit might force him out of business after 30 years.

Among those claiming they have been stiffed:

  • Breakthru Inc. -- owed nearly $600,000.
  • JMS Electric -- owed $907,000
  • Mark 1 Restoration -- owed $950,000.
  • Aspen Plumbing -- owed $1.1 million.
  • The list goes on and on.

    "It could be just a simple dispute over pay. It could be indicative of a bigger problem, you just don't know," Stewart said.

    This is an unexpectedly sordid chapter in the history of Chicago's "Hotel of Presidents." Twelve have stayed there.

    "Teddy Roosevelt, Taft, Wilson, Coolidge, Hoover, Truman, Eisenhower, Nixon and Carter," said Ryan Buck, Blackstone Hotel.

    And during a cigar party in a smoke-filled room, Warren G. Harding became the GOP's pick for president in 1920.

    The hotel received landmark status in 1998 but closed a year later because of code violations.

    At one point, the Beatles' spiritual advisor owned it and planned to turn the 23-story building into high-end condos. But funding for that never came through, and the hotel sat dark for several years.

    Now that the Blackstone is back, behind its expensive new facade is a fight over millions of dollars.

    "This is a historic property; it's right in downtown; it's a high-profile property; it's not just a kitchen remodeling out in the suburbs," said Stewart.

    One subcontractor said McHugh instructed him to "take one for the team" and just eat the loss.

    McHugh Construction and the hotel owner, Sage Hospitality, would not agree to interviews. Marriott, which operates the Blackstone, declined to comment on the change orders that seem to be causing this feud.

    City officials say they will pay out funds to any property that has liens against it.


    To view the liens against the Blackstone go to, click on PIN search, enter PIN number 17-15-301-013-0000

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