A local developer plans to buy a mostly vacant office property in Chicago’s River North at a big discount to the previous sale price in a potential residential conversion play, a deal that would mirror two common themes in the U.S. real estate market.
Chicago Development Partners has an agreement to buy the office portion of a 10-story building at 111 W. Illinois St., which is expected to be redeveloped into apartments, according to people familiar with the situation.
The price is believed to be about $17 million, one person familiar said, a fraction of the $75 million it last sold for in 2015 when Chicago office sales were booming and the property’s vacancy was far lower.
The deal is preliminary and still could fall apart amid high interest rates and other ongoing market challenges that have slowed the pace of deals throughout the country.
If the sale is completed, the buyer is expected to convert unwanted offices into apartments in a continuation of a trend seen elsewhere in the city. It also would continue a trend of high-vacancy offices selling at massive discounts to previous values.
Chicago Development Partners is led by veteran developer Howard Weiner. He has been involved in projects including the Skybridge apartment tower along the eastern edge of the Fulton Market district, the 101 North condominium development at North Avenue and Clark Street on the city’s North Side, and a long-planned boutique hotel project on Wells Street in the Old Town neighborhood.
His firm’s deal is for space on the ground floor and the upper six stories, but it does not include other portions of the building separately owned by a college graduate school, the Erikson Institute.
Office floors were just 22.5% leased when the property went on the market for sale in May, according to a brochure from Cushman & Wakefield. The high vacancy is the result of Salesforce leaving a large portion of the property when it consolidated space from several nearby buildings into the new, 60-story Salesforce Tower along the Chicago River.
Cushman & Wakefield is representing Sydney, Australia-based seller Macquarie, which took over the property as part of its purchase of German’s GLL in 2018. GLL had bought the Illinois Street property in 2015.
It’s not clear how many residential units Weiner’s conversion would create, but Cushman & Wakefield promoted the deal as an opportunity to develop about 145 apartments.
Macquarie declined to comment to CoStar News. Weiner did not respond to requests for comment.
Locally and throughout the country, high-vacancy office buildings have been eyed for redevelopment into uses including residential, data storage and industrial space.
City officials are backing plans to convert portions of a few LaSalle Street office buildings in Chicago into apartments, many with affordable rents.
On the Magnificent Mile shopping district, a Connecticut-based developer is planning to convert the upper floors of a 24-story office building at 500 N. Michigan Ave. into 320 apartments.
River North is a high-demand residential neighborhood because of its combination of commercial space, hotels, bars, restaurants and entertainment.
For the Record
The seller is represented by Cushman & Wakefield brokers Cody Hundertmark, Tom Sitz and Dan Deuter.