It is also within a year of a HK$600 million rights issue last May aimed at fuelling a doubling of its stable of US hotels.

''It is our strategy to acquire key hotels in strategic cities in a depressed market with a view to longer-term asset appreciation,'' said Harbour Centre Development managing director Edward Cheng.

''City Place will broaden and diversify HCDL's asset base in the US,'' he said.

The buyer, controlled by Wharf (Holdings), intends to bring the hotel under the Omni Hotels network, which manages all hotels presently owned by Harbour Centre Development.

Omni Hotels, also a Wharf subsidiary, has 40 hotels in North America.

Wharf executive director John Hung had said both Harbour Centre and Omni Hotels would benefit if new purchases by Harbour Centre were managed by Omni.

City Place is now managed by Hyatt Hotels and owned by City Place International, a wholly-owned subsidiary of First National Bank of Chicago.

The 40-storey property, with a built-up area of 485,000 sq ft, has about 25,000 sq ft of retail space on the first two levels, a total of 347 hotel suites on the next 24 floors and about 140,000 sq ft of office space on the top 13 floors.

The property, completed in 1990, includes one restaurant, meeting and function facilities, and other amenities.

''The retail and office portion will benefit from our property management expertise,'' Mr Cheng said.

The hotel is located on North Michigan Avenue in downtown Chicago's residential and commercial district, Magnificent Mile.

A deposit of US$3 million has been paid and the balance of $50.75 million will be paid in cash upon the completion of the transaction, expected by January 31, 1994.

The purchase will be partly financed by internally generated funds and partly by bank borrowings.

The price was arrived at by Harbour Centre Development based on the property market in Illinois and on forecast future earnings potential of the hotel. It was accepted by the vendor through a sealed bid auction process.

Sassoon Securities research analyst Vivian Kwok Wing-wai said the deal appeared to be a good one for HCDL.

Ms Kwok said it was a wise move to buy now when the US property market had fallen to a great extent.

Rentals of retail property, for instance, have dropped from US$20 to $15 per square foot in the past six months.

She said the company's financial strength was heavily geared by the net cash balance of HK$276.7 million from last year's rights issue.

Occupancy rates of Omni hotels in the US was about 60 per cent, Ms Kwok said.

Last March, Harbour Centre Development paid HK$400 million for the 420-room Marriott Mandalay Hotel - renamed the Omni Mandalay Hotel - in Texas, three months after it agreed to pay HK$270 million for the 381-room Inn on the Park in Houston - renamed theOmni Houston Hotel.

Wharf, part of the late Sir Yue-Kong Pao's business empire, has developed into a primarily property investment firm with vast interests in terminals, warehouses and hotels.