Vornado Realty Trust is looking to sell land near the Chicago River that it has owned for a quarter-century, after previously seeking to build a 288-unit apartment tower on the site.
The New York-based real estate investment trust has hired CBRE brokers to seek a sale of the surface parking lot at 527 W. Kinzie St., according to marketing materials and someone familiar with Vornado’s plans.
Vornado has owned the site since 1998 when it was included in its acquisition of the sprawling Merchandise Mart nearby.
Efforts to sell the site come just over a year after a venture led by The Habitat Company broke ground on a 33-story, 343-unit apartment tower on the former Cassidy Tire site next door at 344 N. Canal St.
Vornado in recent years had been teeing up a 26-story apartment development on its triangular site at 527 W. Kinzie, which is between Metra train tracks and the Harry Weese-designed River Cottages and Fulton House on the river.
In January 2022, 42nd Ward Alderman Brendan Reilly said in an email to constituents that Vornado had revised its plans for the site and was planning to construct a 290-foot residential tower with 288 units on the site. Because that size is below the maximum allowed under the site’s existing zoning, the project did not require city approval, Reilly said at the time.
It’s unclear why Vornado has now decided to sell the site rather than continue with its development plan, and the firm did not respond to requests for comment from CoStar News.
Vornado earlier this year suspended dividend payments and share buybacks amid rising interest rates and other economic challenges. Vornado more recently has said it plans to sell noncore assets to reduce debt and buy back shares, including its July announcement that it was selling four Manhattan retail properties and the New York Armory Show art fair for a combined $124.4 million.
“We are hard at work on others as well,” Chief Financial Officer Michael Franco said during a second-quarter call with analysts, according to a transcript.
It’s unclear how much Vornado hopes for in a sale of the Chicago development site.
The parcel’s long-existing zoning could boost its value to developers because it predates the city’s Affordable Requirements Ordinance mandating the creation of affordable units on- or off-site for new projects. The buyer of Vornado’s site can rent all the units at market rents, according to CBRE materials, significantly increasing the developer’s rate of return.
The site is in the Fulton River District, putting it close to the Loop business district, River North and the Fulton Market district. CBRE is emphasizing the site's proximity to the river and Kinzie Park, likely preserving views of the new tower to the north and east.
Area Upgrades
The Merchandise Mart, or the Mart, recently unveiled several new amenities including a new outdoor plaza along the river. Those upgrades are among massive investments Vornado has made during its ownership, converting much of the ultrawide building's space from design showrooms to higher-rent-paying offices.
Vacancy has risen to almost 20% in the Mart during the second quarter, Vornado reported in public filings. However, earlier this month CoStar News reported Vornado is negotiating a deal with Interpublic Group to lease 70,000 to 80,000 square feet in an expected relocation from the former John Hancock Center.
Vornado has owned the 25,745-square-foot Kinzie Street site since 1998 when it was included in the company’s $625 million acquisition of the 4.2 million-square-foot Merchandise Mart just across the river to the east of the lot. The deal also included the former Apparel Center, which Vornado has since sold, and properties in Washington, D.C.
The seller was the Kennedy family, which kept the riverside Wolf Point site where it is wrapping up a three-tower development capped by the 60-story Salesforce Tower office skyscraper.
Joseph P. Kennedy Sr., patriarch of the American political dynasty, assembled the properties along the river starting in the 1940s. His grandson Chris Kennedy, son of former U.S. Attorney General and Sen. Robert F. Kennedy, now oversees the real estate holdings.
The Wolf Point development was done in a venture with Hines, with Chicago businessman Larry Levy and the AFL-CIO Building Investment Trust also investing.
For the Record
Vornado is represented by CBRE brokers Tom Svoboda and Blake Johnson.