A Los Angeles firm appears to have emerged as a potential investor to reinvigorate the stalled $6 billion Lincoln Yards mixed-use project, one of three multibillion-dollar megadevelopments in Chicago facing potential pivots.
Representatives of the Kayne Anderson alternative investment firm joined executives from Lincoln Yards developer Sterling Bay last month in a meeting with city planning officials, according to people familiar with the situation, in a sign the firm is considering whether to join forces with the Chicago developer to restart one of the most ambitious real estate plans ever launched in the city.
News of that firm’s interest in joining the project has emerged as two other long-planned megadevelopments— Related Midwest’s The 78 between the South Loop and Chinatown and the Farpoint Development-led Bronzeville Lakefront, which could cost an estimated $15 billion to complete in the years to come — are being batted around as potential sites for new professional sports stadiums.
The latest twists demonstrate that massive projects such as Lincoln Yards, even in the hands of accomplished developers, probably will require tweaks because they take so long to plan and complete. That leaves them vulnerable to potentially multiple changes in economic conditions.
The three sprawling Chicago projects already have been affected by a global pandemic, rising construction costs, and a series of interest-rate hikes, among other unforeseen challenges.
Sterling Bay has been looking to replace existing lenders and investors such as J.P. Morgan Asset Management and Lone Star Funds amid reports that the Chicago developer has faced financial challenges since breaking ground on the 55-acre project on formerly industrial land along the Chicago River on the city’s North Side in 2021.
Kayne Anderson’s involvement in the meeting with city officials signals that Sterling Bay could be close to bringing on at least one deep-pocketed investor to continue a city-approved plan to build 14.5 million square feet of space, including life science research, offices and apartments, with zoning allowing for towers as tall as 595 feet high.
Lone Building Completed
So far, the only structure completed is an eight-story life science research building at 1229 W. Concord Place, which has yet to land any tenants. Sterling Bay also is planning several apartment projects near Lincoln Yards.
CEO Andy Gloor has criticized previous Mayor Lori Lightfoot for not supporting Lincoln Yards and causing slowdowns on approvals for aspects of the project such as infrastructure improvements.
Sterling Bay and Kayne Anderson have yet to publicly comment on a potential partnership, first reported by The Real Deal Chicago, and it’s unclear how much the Los Angeles firm is considering investing.
A spokesman for Chicago’s planning department confirmed there was a February meeting with city planning officials to discuss topics such as a redevelopment agreement that includes an initial commitment from the city to reimburse the developer for as much as $487.8 million for infrastructure such as roads and bridges that Sterling Bay would fund upfront.
Kayne Anderson declined to comment to CoStar News, while Sterling Bay didn’t respond to an email and phone call seeking comment.
According to its website, Kayne Anderson, which has a Chicago office, has $35 billion in assets under management. Its real estate investments also include offices, senior and student housing, traditional apartments and self-storage.
Beyond investment dollars, Kayne Anderson’s background in medical and life sciences properties could be valued by Sterling Bay.
Kayne Anderson’s Florida-based real estate investment arm already owns healthcare properties throughout the area in a partnership with Chicago-based Remedy Medical Properties, including recent acquisitions in Chicago suburbs Oak Brook and Elgin.
Tax-increment financing dollars generated from Lincoln Yards buildings later could be used to pay back the developer’s infrastructure-related costs. The Chicago City Council previously approved up to $1.3 billion in public dollars to support the project. Amounts beyond the nearly $488 million would require further city approvals.
Until the Lincoln Yards quagmire, Sterling Bay enjoyed a run of high-profile development successes — particularly in the Fulton Market district, where it landed McDonald’s global headquarters and Google’s Midwest headquarters for major projects.
Other Development Sites
Sterling Bay’s co-founder, Scott Goodman, now leading Farpoint Development, is part of a group of developers on the Bronzeville Lakefront mixed-use development on what could be expanded to as much as 100-plus acres south of Soldier Field, home to the NFL’s Chicago Bears.
That site recently has been publicly floated as a potential site for a new Bears stadium, but the football team appears to be focused on a lakefront site next to Soldier Field. If that site doesn't work out, some real estate professionals say the Bronzeville Lakefront site would be a logical, nearby alternative.
Farpoint already has begun building infrastructure to support a planned community including apartments, life science research and office space, entertainment, retail and data storage on and around the former Michael Reese Hospital site. But no buildings are under construction.
As the Bronzeville Lakefront site receives preliminary mentions as a potential sports venue site, the firm behind a third megadevelopment, Related Midwest, is teaming up with Chicago White Sox owner Jerry Reinsdorf to seek public funding to support a new ballpark on its 62-acre site along the river south of the Loop business district.
The 78's developer provided a first public look at the baseball venue within its mixed-use project in February. Landing the ballpark, and public dollars to help pay for it, would lead to big changes for a project previously envisioned to include skyscrapers up to 950 feet tall, with a mix of residential, office, hotel, entertainment and restaurant space.
The state-funded, University of Illinois-led Discovery Partners Institute is planned for the south end of the site, regardless of whether the ballpark plan comes to fruition.