In commercial real estate, air rights are often a source of contention between developers and residents, especially when it comes to blocking views or historic buildings being demolished. But in Chicago, a rare case of cooperation could be emerging.
A developer controlling several parcels along three of Chicago’s wealthiest neighborhoods wants to buy air rights controlling space above a property from nearby residential and commercial property owners in a deal that could lead to a tower by well-known architect David Adjaye.
It’s not uncommon for developers to buy air rights from neighboring property owners, a move that allows builders to add height and density to new projects. Air rights above an existing structure can be transferred to an adjacent property if there is unused zoning density, or floor area ratio, on the site.
Chicago-based developer Fern Hill’s approach is to fold air rights and greater density on one site into a broader development agreement for several parcels. Once air rights are sold by a building owner, the height of buildings allowed on that site is forever capped.
Creating a master plan with height-limit guarantees would protect nearby condo towers’ lake views and limit the creation of new towers in the immediate area to the single site, company founder Nick Anderson said in an interview with CoStar News. It could also help preserve 19th-century buildings, he said.
“It’s a nontraditional process, different from, ‘How can I maximize the value of my site?’ This is a way to address the needs of the neighborhood as it’s grown organically over the past several decades,” Anderson said. “We want to allow the neighborhood to develop and grow while also maximizing the community benefit.”
The owners would have to agree to height limitations on most of the parcels in exchange for community support for the tower as the centerpiece of a long-planned North Side project. Fern Hill is pitching the proposal to neighbors as it seeks backing for its master plan on high-profile land along the Old Town, Lincoln Park and Gold Coast neighborhoods not far from the city’s largest park and Lake Michigan.
There's no guarantee any agreement could be reached and when dealing with multiple parties, various factions can develop, making a successful project more difficult.
Working With Residents
Even so, a meeting was held between the developers and neighbors Thursday, hosted by 2nd Ward Alderman Brian Hopkins. He has yet to take a stance on backing the project, which ultimately would require zoning approval from the full City Council.
In an unusual approach to the city’s zoning approval process, in which developers meet with community groups after drawing up specific site plans and renderings, Fern Hill publicly launched the project in 2021 as a blank slate, asking residents what the neighborhood needs.
Residents have indicated that high priorities included bringing in a new grocery tenant for the former Treasure Island grocery building on Wells Street, a property Fern Hill owns, as well as other amenities such as outdoor space and a more walkable neighborhood, Fern Hill said. Responses indicated some opposition to more tall buildings in an area north of the Loop business district that has a mix of residential towers with views of the lake and low-rise residential and retail buildings.
The area includes longtime institutions such as The Moody Church, which plans to sell some land and air rights to Fern Hill, as well as the Chicago History Museum, the Latin School of Chicago and the Second City comedy club.
Fern Hill already owns the former grocery on Wells and two gas stations along opposite sides of the church.
Anderson, a former Related Midwest executive, said he is focused on consolidating most of the development’s height and density onto a single site, a parking lot at the northwest corner of LaSalle Street and North Avenue owned by the church located across the street.
By doing so, the developer could increase construction height on the surface lot while providing guarantees that it would not later seek vertical redevelopment of sites such as the gas stations — where heights would forever be limited to 50 feet — and the grocery store, where it is seeking out a new grocery tenant.
No Plans Drawn
Anderson declined to say how tall a tower Fern Hill envisions for the site.
He said London-based Adjaye — who was knighted by Queen Elizabeth II in 2017 and whose projects throughout the world have included the Smithsonian National Museum of African American History and Culture in Washington, D.C., and the 66-story 130 William residential tower in Manhattan — has not drawn up a specific design for the site.
The height and design will depend on how many neighboring property owners want to sell air rights or otherwise back the project, Anderson said.
Transferring zoning density to Fern Hill would increase the value of the the firm’s project on the parking lot while reducing the amount developers might be willing to pay for low-rise buildings that they want to demolish and replace with taller structures.
But such deals would remove the financial incentive for property owners to sell historic, 1800s-era buildings to developers, allowing residents and businesses to stay for the long term while preserving the neighborhood’s character, Anderson said.
“By working with owners like that, we can incorporate any unused air rights so that they don’t ever have to tear down their buildings,” Anderson said. “The value has already been maximized without tearing down their buildings. This is a neighborhood that’s been around and developed over since the 1850s."
He added that "these really cool buildings that surround this important intersection are small. Once the land becomes worth more than the building, you are now in a preservation battle. That doesn’t have to happen here.”
Without a master plan in place, sites such as the gas stations will undergo separate zoning approval processes as they’re redeveloped over time, Anderson said.
Following the meeting, Anderson said the firm will spend a few months meeting with neighbors and coming up with formal plans to present to the community.