One of the busiest real estate developers in Chicago’s Loop business district has added yet another property in need of an overhaul, paying $12 million for the former Cboe Global Markets headquarters building for an expected conversion to a data center.
A Prime Group affiliate last month bought the wide, six-story office building at 400 S. LaSalle St. from the options exchange company, according to Cook County property records.
The Chicago-based buyer is led by veteran Chicago developer Mike Reschke, whose firm is involved in several high-profile projects in and around the Loop, most notably the ongoing redevelopment and eventual sale of the formerly state-owned James R. Thompson Center to Google.
Prime Group said the 400 S. LaSalle acquisition is in a joint venture with a frequent partner, Quintin Primo's Chicago-based Capri Interests.
Unlike the partners' previous deals to redevelop office space for new tenants or convert it to hotel or residential uses, the plan for 400 S. LaSalle is to convert the cavernous. 385,000-square-foot structure to a data center at the south end of the city's longtime financial district.
“The acquisition of 400 South LaSalle exemplifies our continued commitment to the revitalization and growth of downtown Chicago," Reschke said in a statement to CoStar News. "The building is very well suited for adaptive reuse and conversion to data center use, bringing more supply to a sector that has shown fast-growing demand for space and power capacity.”
Long Sale Process
Cboe first confirmed plans to move out of and eventually sell 400 S. LaSalle in 2019, less than a year before the arrival of COVID-19.
The sale process played out amid increasing vacancy on and around LaSalle Street as big employers such as Bank of America and BMO Financial have left older towers for newly developed offices along the Chicago River and farther west in Fulton Market.
In an email to CoStar News, a spokesperson said Cboe hasn’t needed the 400 S. LaSalle space since moving its headquarters to the Old Post Office in 2020 and shifting its open-outcry trading floor to the Chicago Board of Trade Building in 2022.
The Prime Group-Capri Interests purchase of the building was backed by a $7 million loan from a Cboe affiliate, according to property records.
During a national slowdown in property sales and new projects since the onset of pandemic more than four years ago, and more recently because of factors including rising interest rates, Reschke’s firm has kept busy with projects that involve finding new uses for decades-old buildings.
Data Storage in Demand
The developers said they have been planning to buy the Cboe building and convert it to data storage for more than a year, during which time demand has soared because of increased use of cloud computing and the evolving artificial intelligence sector.
There already are several data centers not far from 400 S. LaSalle in the South Loop, and Cboe previously had a data center within the building.
The building's wide, column-free floors, high ceilings and structural capacity to handle the weight of servers and other data storage equipment make 400 S. LaSalle an ideal conversion candidate, according to Prime Group Executive Vice President Jeff Breaden. The developers are working with ComEd to increase power to the building so that it can have 50 megawatts of data storage capacity, he said.
Design of the building is underway and the developers are starting the process to line up a large tenant.
Data centers have emerged as one of the most likely uses for outdated office space, according to a CoStar analysis.
The sprawling former Sears headquarters campus in Hoffman Estates, Illinois, and other office buildings in Chicago's suburbs are being demolished and replaced by big new data centers.
Booming demand also is leading to ground-up developments, including a plan by Google and financial derivatives exchange operator CME Group to move trading into the cloud, backed by a planned facility within an existing data-center campus in Aurora, Illinois.
Full Plate
Prime Group is part of two of the four initial projects chosen by the city to potentially receive more than $150 million combined in public funding for the conversion of unwanted office space along the LaSalle corridor into 1,000-plus apartments, with at least 30% of those units to have below-market rents in exchange for the public incentives.
Prime Group’s residential conversion projects are for portions of the 23-story tower at 111 W. Monroe St. and the 21-story tower at 208 S. LaSalle St. Reschke’s firm already has developed two hotels, the JW Marriott and The LaSalle, on other floors of the vintage office building at 208 S. LaSalle.
Reschke’s company also is part of a joint venture that plans to buy the historic Jewelers Building at 35 E. Wacker Drive. Prime and CRG are considering converting part of the 40-story building into a hotel or apartments.
Work with Google on the Helmut Jahn-designed Thompson Center is ongoing.
Prime Group also led the ground-up development of the recently opened, 390-room Riu Plaza Chicago hotel at 150 E. Ontario St. for the Spanish luxury hotel chain.
Capri Interests is Prime Group's partner on one of the residential conversions and the Thompson Center project.
The city program to convert office space to affordable apartments began under previous Mayor Lori Lightfoot and has advanced under first-term Mayor Brandon Johnson, whose administration recently chose four projects to move on for further evaluation by the city.
For the Record
The seller was represented by Colliers International brokers Holly Duran and Jeff Mulder and JLL broker Bruce Miller. Cushman & Wakefield broker Alex Smith is representing the developers in data center leasing.