A Connecticut-based developer wants to buy a 24-story office building on Chicago’s Magnificent Mile and convert most of the floors to 320 apartments, joining a list of firms drawing up conversion projects in and around the Loop business district.
Commonwealth Development Partners plans to buy the building at 500 N. Michigan Ave. and, pending approval from the city, begin a residential conversion, according to people familiar with the building and an email sent to constituents late last week by 42nd Ward Alderman Brendan Reilly.
That announcement comes as Chicago officials look to convert outdated office space on and around LaSalle Street, the city’s longtime financial center, to apartments. Chicago Mayor Brandon Johnson announced he was backing more than $151 million in public funding for four conversion projects that combined would create 1,000-plus apartments, 30% of which would have affordable rents, west of the Mag Mile shopping district.
Office-to-multifamily conversion projects have emerged throughout the country as remote and hybrid work trends have continued in the four years since the onset of COVID-19. Office tower values have further deteriorated because of other factors including rising interest rates.
The 500 N. Michigan residential scheme adds a new chapter to long-running plans to potentially switch the building’s primary use away from office space.
Shopping mall owner Macerich, which owns the neighboring Shops at North Bridge vertical mall, bought the building for nearly $71 million in 2012 with plans to connect lower floors of the office tower to the mall and switch some space to retail.
But Macerich never went through with the plan before eventually selling 500 N. Michigan to the current owners, a group of international investors, for $86.35 million in 2017, according to CoStar data.
The current owners put retail floors of the building on the market for sale in early 2023, CoStar News reported at the time, but the space never sold. Earlier this year, CRE Direct reported that the entire building was for sale as the owners looked to pay off the property’s loan from real estate investment trust Granite Point Mortgage Trust.
Commonwealth seeks a zoning change to convert floors 6 through 23 into residential units with the third through fifth floors to remain as office space, according to Reilly’s email and an attached development description. The bottom two floors will remain as retail.
Commonwealth’s plan is to add indoor and outdoor amenities atop the tower, including a new outdoor terrace that would add 18 feet to the building’s height, according to Reilly. The downtown alderman said Commonwealth’s plan will be discussed in an upcoming meeting of the Chicago Plan Commission as part of the process to amend the zoning, which also would require approval of the full City Council.
It’s unclear how much Commonwealth’s conversion would cost or how soon the firm hopes to start the project. The company did not respond to a request for comment from CoStar News.
The company has more than 1,000 multifamily units under development and more than 750 more in various stages of predevelopment, according to its website.
Under Contract
In a call with analysts in May, Granite's president and CEO, Jack Taylor, said the building was in the process of being sold, “which could happen in the intermediate term,” according to a transcript of the call.
Taylor did not name the buyer or say how much the building was selling for, but people familiar with the deal said Commonwealth is buying the property for less than the $81 million balance on the loan.
It is unclear whether Granite Point will provide financing to the buyer. The company did not respond to a request for comment from CoStar News.
Crain’s Chicago Business earlier reported Commonwealth’s plans for the building.
The building is just under 41% percent leased, according to CoStar data.
Retail space at the base of the tower is fully leased to Bank of America, Vans and Chick-fil-A, although the Vans space recently has been marketed as available to potential tenants.