Blommer Chocolate plans to end its 85-year tradition of sending candied aromas into Chicago’s River West in May, but real estate developers are getting a fresh whiff of the possibilities of the long-coveted site on Kinzie Street that's large enough to hold two residential high-rises.
After announcing plans last week to shut its four-story factory at 600 W. Kinzie St., Blommer now says it is headed toward an eventual sale of the 5.5-acre site that long has been eyed by property professionals.
Operations at the factory that makes chocolate and confectionery coatings will wind down by the end of May, a Blommer spokeswoman said in an email to CoStar News. The company eventually will sell the building after it is decommissioned, though it hasn't yet settled on a broker, she said.
Blommer this week filed a notice with the state that it plans to lay off 226 workers at the plant at the end of May, according to a WARN, or Worker Adjustment and Retraining Notification, Act filing posted online.
The long-term fate of the factory has been speculated about for years in Chicago, especially since Blommer was acquired by Japanese ingredients company Fuji Oil Holdings about five years ago. The site is officially now headed toward the for-sale market after waves of development in and around River West in the past several years, causing the property's value to rise and leading real estate investors to eye the site for long-term redevelopment.
Growth in the area is offset at this time by high construction costs, rising interest rates and other factors that have made new projects difficult to finance and could hold down the value of the land, according to real estate professionals familiar with the area.
“Today it’s not feasible, but the buyer won’t be looking at developing it today,” said Steve Fifield, co-founder and CEO of Chicago-based residential developer Fifield Cos.
Fifield’s firm developed five apartment towers near the Blommer site as part of its K Station project over former rail yards. He said the firm will look at the Blommer opportunity when it hits the market.
Shaky market conditions now may not matter to potential buyers, because they’ll likely need time to seek zoning approval for a major project on the site, design the project, demolish the Blommer factory and secure construction financing, Fifield said.
It’s possible Blommer could demolish the structure itself before putting the site on the market, he said.
“Demolition is just another delay, and time is money,” Fifield said.
Fast-Growing Neighborhood
Blommer’s longtime site is just east of the fast-expanding Fulton Market district and just south of Bally’s planned casino campus along the Chicago River.
The site is also near the three-tower residential and office development of the site at Wolf Point and close to some of the city's highest-rent office buildings.
The site's desirable because “you can walk to River North, walk to the West Loop, and there are amenities in the area with the Jewel-Osco store” at 370 N. Desplaines St., Fifield said. “The question is whether rents in the neighborhood are high enough to justify construction costs given the city’s affordable requirements ordinance.”
Unlike when the K Station towers were developed, that ordinance now requires 20% of units within a project to be at below-market, affordable rents, pushing down profits for developers, Fifield said.
Nearby, Chicago-based firms The Habitat Co. and Diversified Real Estate Capital are close to completing the 33-story, 343-unit Cassidy on Canal apartment tower at 350 N. Canal St., on the former Cassidy Tire building site. Preleasing recently began, with the first residents expected to move in by May.
Next to it, New York-based Vornado Realty Trust late last year put a parking lot at 527 W. Kinzie St. that it has owned for almost a quarter-century up for sale.
Residential towers could make sense for the Blommer site based on buildings in the area, but Fifield said the upcoming casino at the Freedom Center site could attract hoteliers as well. The need for more restaurants and services for the growing River West population could help fill retail space at the base of new towers, Fifield said.
Blommer’s headquarters will remain in Chicago, within a Merchandise Mart space that will include a research-and-development center and a lab, the company said in the statement last week.
The chocolate company said it will invest about $100 million to upgrade its other factories in Pennsylvania, California and Canada.
The Chicago facility was too old and in need of too many repairs to keep open, the company said. The factory opened in 1939.