What goes around comes around. It’s true in life and sometimes in the exclusive world of real estate development.
New construction is dominated by business cycles of boom and bust. Chicago has had several development sites that, because of bad timing or misconception, hit the market several times before taking off.
The best example was Block 37 in the Loop, occupying the space between the Daley Center and Macy’s. It was an economic puzzle for investors and city officials for a couple of decades before finally emerging as a mixed-use mishmash, architecturally undistinguished but busy until the pandemic.
Wolf Point next to the Merchandise Mart also was a woebegone site for its owner, the Kennedy family. The patch where Chicago literally began as a commercial center remained open for years, the scrub trees that grew up along the riverbank a reminder of when this was wilderness. Finally, years of demand growth for downtown living and working took hold, and now the last of three towers on the property is under construction.
Remember the old Sun-Times Building at 401 N. Wabash Ave., also along the river? It was for sale on and off for years, always at the wrong time. Former Chicago Tribune writer John McCarron once sagely observed that you could always tell the property bubble was about to burst because the Sun-Times Building had hit the market. Then Donald Trump was being driven through Chicago on some errand and he spied the old office building/newspaper factory, telling me later he pointed at it and said, “What’s that?” The rest is history and now his tower holds that spot securely for maybe the next century, if the republic gets there.
All of these sites were castoffs in real estate cycles before making their contribution to the skyline and the property tax rolls.
Now comes the Episcopal Diocese of Chicago, solid citizens of Streeterville, with offices at 65 E. Huron St., immediately east of its St. James Cathedral. The diocese is putting up for sale the 65 E. Huron property, with its five-story office building and a small plaza, potentially for a lucrative high-rise. The cathedral is not included.
The diocese tried that before. In 2008, the developer Related Midwest stared at the deep recession and scrapped plans there for a condo and hotel complex anchored by a Canyon Ranch spa. At 64 stories, it would have catered to the wellness whims of the wealthy and might have been the most posh development in the city, Trump’s tower notwithstanding.
This time, the diocese expects its property to hit the market in 2021. It has hired Andrew Norman and Yolanda Valle of the firm CBRE to manage the sale. Bishop Jeffrey Lee said he and diocesan trustees acted because maintaining the office space was costing $750,000 a year. He called that “an increasingly unsustainable burden” in a letter to Episcopalians. (Full disclosure: I’m one.)
Lee and attorney Lonn Myers, first vice president of the trustees, declined to guess what the property is worth or what will be built on it. They said proceeds would serve as an endowment, with a “meaningful portion” devoted to investments in affordable housing. But there won’t be a requirement for on-site affordable housing.
The bishop, who is retiring at year-end, said he has twice had to shrink diocesan staff since arriving in 2008. It now totals about a dozen and the pandemic has shown that employees can be effective at remote locales, Lee said. He said discussions will resolve how to accommodate within the new development those programs of St. James Cathedral that use the office building.
Any opportunity like this is a multiyear venture, with maybe a year or more needed just to get zoning approvals through the community and the City Council. Asked about the project, Ald. Brendan Reilly (42nd), who dealt with the Canyon Ranch deal, messaged that he wasn’t surprised the Episcopalians are trying again to sell, citing the fiscal problems facing many denominations. “Whoever purchases the site can expect to go through a robust public process with the River North Residents Association and my office,” Reilly said. Related Midwest declined to comment on whether it might still want the site.
Will the timing be right? The diocese could be shrewd to start this amid numerous questions about property markets. “We’re starting this in 2021, and by then we would anticipate that the market would be somewhat better,” Myers said.
Lee promised a deliberative process. “With real estate, there are always unknowns but, boy, are they exaggerated now,” he said.
The plan is to leave the diocese better focused on grassroots ministries. Hope springs eternal, but the diocese needs speculative fervor to do so, too.