Oct. 31--One of Chicago's largest and best-known hotels, the Marriott on North Michigan Avenue, is being put up for sale by a joint venture that includes an investment firm headed by former Defense Secretary Frank Carlucci. 

Bids for the prominent 1,192-room property at 540 N. Michigan Ave. could reach a lofty $230 million, or more than $190,000 per room, despite the industry-wide downturn in travel, sources close to the joint venture said. 

The Magnificent Mile hotel was redeveloped with a new, flashy facade of chrome and green glass in 1998, as the first step in the Nordstrom-anchored North Bridge development. 

Carlucci is co-founder and chairman of Carlyle Group, which formed a joint venture with Bethesda, Md.-based LaSalle Hotel Properties to acquire the hotel in January 2000, paying $175 million. 

Hodges Ward Elliott Inc., an Atlanta-based boutique specializing in hotel sales, has been retained to market the property, confirmed Mark Schoenfeld, managing director with Washington, D.C.-based Carlyle. He would not comment further. 

The sale could be a test of the investment market for hotels, which has gained momentum in recent months after a slowdown, experts said. 

Many potential hotel buyers have been sitting on the sidelines, waiting for signs of recovery by the hospitality industry, which has been hit hard by the recession and last year's terrorist attacks. 

"There's a lot of money out there chasing deals," said Ronald Danko, senior managing director with Insignia/ESG Hotel Partners, which represented Pittsburgh-based FFC Hospitality LLC in the sale earlier this month of the 357-room Hilton Garden Inn, also in the North Bridge development, to Black Entertainment Television founder Robert Johnson. 

"Investors such as life insurance companies and pension funds are moving money from the stock market into real estate," he said. 

Hotel consultant Ted Mandigo, president of Elmhurst-based T.R. Mandigo & Co., said overseas investors, who favor real estate in premier locations, would be attracted to the hotel. But lenders are still cautious, requiring buyers to make large cash down payments. 

"You still have to put a big chunk of equity into it to do a deal," Mandigo said. 

Carlyle has a 90.1 percent stake in the joint venture that owns the hotel, which is managed by Marriott International Inc. under a long-term contract. 

The hotel was acquired with a $120 million mortgage, or 69 percent of the $175 million purchase price. This year, the joint venture refinanced that mortgage with a short-term loan, but did not increase the debt. 

The hotel's value was enhanced by the completion in late 2000 of the North Bridge development, which includes hotels and retailing. For example, Nordstrom's main entrance is next door to the hotel. 

And North Bridge has helped draw several retailers to that end of North Michigan Avenue, such as the Gap flagship store at 555 N. Michigan. Even a retail redevelopment of the stately Wrigley Building is being considered. 

Even so, reaching a price of $230 million poses a challenge because the Chicago hotel market is just now starting to return to the room charges and occupancy levels of two years ago. 

"I can't imagine that its performance has increased over that period of time, just knowing what the landscape is like in Chicago," Danko said. 

But the increase in capital for real estate investment, coupled with signs that the Chicago hotel market is improving, could boost the sale, Danko and other experts said. 

Carlyle and LaSalle "are figuring on moving it at the bottom of market," said Mandigo, "and we're on a little bit of an uptick right now." 

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