Chicago is one of many large cities across the nation whose downtown office market has been adversely affected by the pandemic and the resulting increase in remote work. The city recently announced $150 million in grants to real estate developers to spur development in the downtown core. The measure will encourage the development of more than 1,000 apartments in four separate adaptive developments.
30 North LaSalle Street, Chicago. (Capri Investments)
“These transformative projects [Chicago] “The Loop is more than just a revitalized space; it embodies our city’s commitment to inclusivity and growth,” Mayor Brandon Johnson said in a statement. “By creating more than 1,000 homes, including more than 300 affordable units, we are investing in the future of countless Chicago families and maintaining the Loop community as a welcoming hub for all.”
Developer Quintin E. Primo III, founder of Chicago-based Capri Investment Group, has been focused on redeveloping downtown, particularly the Loop, when he and Michael Reschke’s Prime Group bought the 1.3 million-square-foot Thompson Center for $105 million two years ago and simultaneously signed a contract with Google to build custom homes there.
The deal will see Google acquire the redevelopment project once it’s complete, and Primo, speaking from experience, praises the new subsidy.
“I think this is a really important initiative for downtown Chicago’s Central Loop, particularly the LaSalle Street corridor,” Primo said. “Google’s plans to work with Prime/Capri on the Thompson Center building will be catalytic change for the entire downtown market, but I think that catalyst needs further support from the city.”
Primo said LaSalle’s tax increment financing assistance would essentially provide subsidized capital to real estate developers to help spur affordable housing projects. Primo believes the initiative will be a game changer.
“I think LaSalle’s program, in addition to what’s going on at the Thompson Center, will be really transformative for the Central Loop. [affect]”I think the downtown office and commercial market will benefit,” Primo said.
Tax increment financing
According to the mayor’s office, tax increment financing (TIF) will ensure that at least 319 of the planned units will be rented at affordable rates. The four affected developments include 111 West Monroe Street; Prime/Capri plans to build 345 units, 105 of which will be affordable, in two adjacent buildings using $40 million in TIF funds for the roughly $200 million project. Additionally, 4 percent low-income housing tax credits are also proposed, as are federal loans, tax-exempt bonds, and historic tax credits for the project. The project would also include a 228-room hotel. The development could also receive city landmark designation.
The other project, at 208 S. LaSalle St., a century-old city landmark, will include 226 housing units, 68 of which will be affordable, with $26.2 million in TIF funds pumped into Prime Group’s $122.7 million project.
The $130.2 million high-rise residential development planned for 30 North LaSalle Street by real estate development investment firm Golb & Company LLC and American General Life Insurance Co. will be funded with $57 million from the city and will include 349 housing units, 105 of which will be affordable.
The fourth project is a $64.2 million development by Campari Group, located in the 1913 Bell Federal Building at 79 W. Monroe St., that will renovate the building’s eight floors into 117 housing units, 41 of which will be affordable using $28 million in tax increment financing. The building’s famous “Weather Bell” sign, designated a Chicago landmark by the city, will also be restored as part of the project, according to Chicago officials. Affordable units in each development will be reserved for renters earning 60 percent of the area median income, or about $53,000 for two people.
Chicago resident Farzin Paran, executive director of the Chicago Building Owners and Managers Association, said the move is a good start for the city. Paran said Chicago’s downtown office market is experiencing an “unprecedented crisis as tenants continue to downsize or abandon office space.”
“Downtown office vacancy rates have soared to an all-time high of 24 percent, and bank foreclosures and distressed property sales are frequently in the news,” Parang said. “Building transactions have slowed significantly, while the few properties that sold last year suffered significant losses of 50 to 89 percent. Program [such as] “LaSalle Street Reimagined is essential to revitalizing our downtown.”
But other steps should also be taken to invest in additional programs, such as public transportation and public safety, as a way to encourage local residents and workers to return to downtown Chicago, which would help revitalize the economy, Palan said.
While downtown Chicago has been hit hard by the pandemic, office buildings on LaSalle Street and in the Central Loop were actually declining before COVID-19, according to Caitlin Ritter, research director for Transwestern Real Estate’s Chicago office. That’s why Ritter believes “if COVID-19 hadn’t come along, the office market could have recovered without subsidies.”
Despite these comments, Ritter said it’s still not clear if the subsidies will actually be enough, but that it’s a good thing the money will increase overall housing stock, including affordable housing, which is an urgent need for the city.
“We expect the grant funding will have a significant impact,” Ritter said. “It will (a) remove a large portion of the old office stock from the market, reducing vacancy rates, and (b) attract more residents to the downtown area, creating a richer 18-hour live-work-play environment, supporting street-level retail and activity, and increasing the area’s attractiveness to office occupants.”
Helping the homeless
Primo also believes that increasing housing options would be beneficial in helping people who are homeless. He has long been a vocal supporter of homelessness. His father, a church bishop, relied on his son’s talents when Primo envisioned a center to help the city’s homeless. The center, known as the Primo Center, is now one of Chicago’s largest providers of housing and health care services.
“It’s a housing issue as much as a homelessness issue,” Primo said of the situation downtown. “There’s not enough affordable housing or units to rent or own, so by building 300 new affordable housing units; [shift] Helps alleviate some of the supply issues [this] New York City and other major cities in the U.S. are suffering, so I think it will have a positive outcome. [affect] The same goes for low-income families and homeless people.”
Chicago’s Community Development Commission voted in favor of all four development plans last month. The projects still need approval from the Chicago City Council.
