Lincolnwood planning hotel on District 1860 site.

Plans are now in place for a new hotel to be constructed at the northwest corner of Touhy and Lincoln Avenues as the village board has approved a tax rebate plan for a new developer interested in the property.

At a special Aug. 22 meeting, trustees unanimously agreed to an Economic Incentive Request proposed by Shamim’s LLC, an affiliate of Lakhani Hospitality, facilitating the construction of a five-story, 152-room hotel at what is now known as District 1860, where the fabled Purple Hotel stood until its August 2013 demolition.

Lakhani, which operates and manages a series of hotels, restaurants and gas stations throughout the Chicago area, is proposing two hotels, a Residence Inn by Marriott and SpringHill Suites in one building featuring an indoor pool, fitness center and 1,900 square feet of flexible meeting space on what is now a vacant 1.2 acre plot.

The agreement calls for Lakhani to receive a hotel tax rebate of an amount not to exceed roughly $3.4 million as Lakhani would be rebated 70% of the village’s existing 7% hotel tax over the next 15 years or until the approximately $3.4 million threshold is reached.

“This plan has been carefully drafted to provide that the village’s obligation to rebate exists only if the village receives payment of the hotel tax from the developer and the hotels are being operated as Residence Inn and SpringHill Suites,” Village Attorney Steven Elrod said.

Following the tax rebate plan approval, trustees directed Village Manager Anne Marie Gaura to put a proposed ordinance on their Sept. 8 meeting agenda for a 2% increase in the village’s hotel tax.

“The rebate agreement specifically states that Lakhani is not entitled to a rebate on any amount of a hotel tax above 7%. Rather, 100% of that increase would go to the village,” Elrod added.

Karim Lakhani, the chief development officer of his eponymous company acknowledged Aug. 16 that supply chain issues, inflation and higher interest rates necessitated the request for the tax rebate.

“There is a financial gap for us to make this project economically feasible,” Lakhani said. “We are hoping that gap can be bridged by that economic incentive we are proposing tonight.”

Mary Jo Dolasinski, an associate professor of hospitality leadership at DePaul University, noted tax rebate plans have been a common practice for years in many communities.

“What hotels bring into the market is the opportunity for increased revenue in restaurants and retail events,” she said. “Tax incentives to encourage hotel development are not uncommon.”

The Lakhani proposal allows the village a second chance for a hotel, which was part of the original District 1860 plan. However, First Hospitality, the first developers, pulled out in 2021 due to the pandemic.

Village officials then began to seek a new developer.

“All of the public input that we got was a hotel was something the village wanted and the village board was adamant about the desire of having a hotel here,” Mayor Jesal Patel said.

Lakhani’s proposal is scaled back from the First Hospitality plan. It is smaller in terms of size and number of rooms, and without a restaurant and bar.

“We think the development, which has over 20,000 square feet in terms of diverse food and beverage outlets, will more than satisfy our guest’s food and beverage needs,” Lakhani said.

Dolasinski believes that despite the ongoing nature of COVID-19 and some reluctance to travel, there remains a market to capture.

“Most economies have started to grow back post-pandemic and global demand is nearing full recovery. US room demand is projected to reach 2019 levels by the end of 2022,” she said. “The largest demand gap in hotels remains in business travel.”

She added even with the technology that has become commonplace since the COIVID-19 outbreak, travel will continue.

“Companies are finding there is still value in getting people together, but they are leveraging technology such as video conferencing where it makes sense and reserving travel for specific purposes,” Dolasinski said.

Lakhani hopes to break ground later this year or by early spring. I foresee a 22- to 23-month construction timeline, leading to an opening either in late 2024 or early 2025.

Meanwhile, construction continues on the rest of the complex, which is set to feature nearly 300 apartments, two restaurants and an Amazon grocery store.

Gaura said construction on that part of the project is expected to be completed by mid-June 2023.

Moreover, drivers on Lincoln and Touhy Avenues are set to get some relief soon from the lane closures. Lincoln is expected to be fully reopened by the end of August and Touhy is set to be completely reopened in October, according to Assistant Village Manager Charles Meyer.

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