Episcopal Diocese needs property sale for fiscal salvation

The Episcopal Diocese of Chicago is headed back into the property markets, and it’s looking like it could use a little divine help.

The diocese, the denomination’s headquarters for northern Illinois, operates from a nearly half-block site at 65 E. Huron St. in Streeterville, the southwest corner of Huron and Rush streets.

With a five-story building and a plaza, it’s the kind of underused site in a prime neighborhood that ordinarily would have developers scheming to get hold of it. And years ago, it was supposed to get a project that promised to be one of the poshest in Chicago.

But hard luck has stalked the diocese’s longtime interest in selling the property. Two former Episcopal bishops here have tried it and been thwarted.

The credit crash of 2008 ended a plan for a 64-story Canyon Ranch condo and hotel tower, complete with a spa, all aspiring to the prestige and adornments of a five-star hotel. The diocese tried again to sell it in 2020, but the pandemic scuttled that plan as it did many others.

Last week, the diocese announced it is trying again. It hired the real estate firm CBRE to market the site.

“The church seems to always wait until there’s a downturn in the market to put its property up for sale,” said James Letchinger, head of JDL Development, probably the most active builder on the Near North Side.

That sums up the diocese’s predicament. Headwinds in the market threaten to slow the pace of high-rise construction by making it more risky. Inflation is driving up the cost of labor and building materials, while rising mortgage rates could sideline some buyers. The pandemic has created enough uncertainty about the appeal of city living that developers of residential mega-projects are taking it slow.

The city in 2020 approved two buildings on the old Chicago Spire lakefront site and a super-tall skyscraper east of Tribune Tower. It would be shorter than Willis Tower by one three-pointer in the NBA. Developers have yet to start construction in either place.

None of that is lost on Mike Mattson, second vice president of the diocesan trustees. He said nobody expects the property to sell quickly, but it should draw attention from developers with a long-term perspective about business cycles.

When the Canyon Ranch idea was in play, the diocese was said to have a buyer, Related Midwest, willing to pay $20 million for the property. Mattson said he hopes the site will fetch more this time but declined to estimate its value.

The sale does not include the church’s adjoining St. James Cathedral at Huron and Wabash Avenue. Mattson said CBRE brokers John Jaeger and Justin Puppi will represent the listing.

Proceeds would have a variety of uses, including help for the church’s ministries and an allotment for the cathedral, Mattson said.

But the diocese’s most pressing need is to cut expenses. “It’s been costing us $750,000 a year to operate our office building. There are a number of different places for our staff that would be less expensive and a lot of work can be done remotely anyway,” he said. Mattson said the staff also has spent more time with the congregations.

Letchinger said he “wouldn’t rule it out” when asked if he’d consider buying the property. “It’s a beautiful spot,” he said, especially for a buyer willing to look past short-term concerns. “If you started on something there today, it’s not something that would happen for another three, four years,” Letchinger said.

Mattson, a retired business appraiser, said the diocese also hopes to apply proceeds toward programs for affordable housing, although it is imposing no demand that a buyer build subsidized units on-site. Any large-scale development would trigger a city zoning review.

The diocese is a motivated seller. Just like other denominations and the Roman Catholic Archdiocese of Chicago, the Episcopalians have closed some churches and seen attendance decline at others. Diocesan staff has been trimmed and some positions left open.

Mattson said decisions about ongoing staffing and finances await the installation of a new bishop, the Rev. Paula Clark, scheduled for Sept. 17.

A diocesan fiscal summary said for 2022, it needs to balance its budget by drawing $1 million, or about 25% of the balance, from special funds the bishop controls apart from operating accounts. The summary said at that rate of withdrawal, the bishop’s funds will be depleted in 2025.

“Clearly, we can’t continue to do what we’re doing right now,” Mattson said. “Otherwise, we will run out of money needed to support our ministries.”