Hotel titan Marriott International will buy the Sheraton Grand Chicago in Streeterville for $500M after its owner exercised an option requiring the purchase.

Marriott will pay $300M for the property and an additional $200M for the land to acquire it from a venture of Tishman Realty, the owner of the 1,218-room hotel at 301 E. North Water St., Crain's Chicago Business reports. The venture exercised an option it received as part of a 2017 settlement to force Marriott to buy the hotel.

The settlement was the result of a lawsuit the Tishman venture filed against Starwood Hotels after Marriott merged with it in 2016, alleging that Marriott's hotel properties would violate a noncompete clause in Starwood's management contract for the Streeterville hotel.

The agreement gave Tishman the option to make Marriott purchase the hotel in 2022, but the terms were amended in 2021 to extend the option period to the first half of 2024, Crain's reported.

Marriott is snagging the building itself at a discount from its previous value. It was appraised at $320M in 2017 and $380M in 2013, according to Crain's. On the flip side, the value of the land has jumped. The 2.3-acre parcel was worth $52.5M when the Tishman venture purchased it in 2009, and it was appraised at over $100M in 2011.

It is unclear why the Tishman venture chose to exercise the option, though it likely provided Tishman with good value and a convenient infusion of cash, Hans Detlefsen, president of Hotel Appraisers & Advisors, told Crain's.

"It's a way to recycle a lot of capital, and it's a way to reduce your debt load by a lot and probably some of your more expensive debt if you're refinancing it in today's environment," he told Crain's.

The deal's anticipated closing date is in the fourth quarter, and Marriott has factored in its cost to its net yearly income, according to the company's Tuesday earnings call.