While vintage office owners are handing the keys to their lenders or seeking conversions to new uses such as apartments, the owners of a 20-story building in Chicago’s Loop business district are doubling down on their 45-year investment.
The owners of the 111-year-old, Daniel Burnham-designed building at 25 E. Washington St. in Chicago said they are adding tenants and pouring $13 million into new amenities to remain competitive at a time when many older buildings in U.S. city centers are struggling to sign and retain tenants.
Recent leasing has lowered vacancy to 15% at 25 E. Washington, with more deals in the works, said Dan Shannon, managing principal at Aspire Properties.
His firm manages and leases the 389,649-square-foot building for Amsterdam-based Kroonenberg Groep and Aventura, Florida-based Trump Group, which have owned the property since 1980.
“They’re long-term holders,” Shannon told CoStar News. “While others are hesitating, they’re doubling down. They’re putting their money where their mouth is. This relatively small building is rewriting expectations for a vintage property.”
Trump Group — led by brothers Jules and Eddie Trump, natives of South Africa — is not affiliated with President Donald Trump’s real estate firm, the Trump Organization. The firm’s projects include the two-tower, ultraluxury Estates at Acqualina condominium project in Sunny Isles Beach, Florida.
Kroonenberg invests in real estate in the Netherlands, Miami, New York and Toronto.
Trump and Kroonenberg are making the $13 million investment in the Chicago building as older Loop buildings struggle to overcome reduced in-person work and other long-lasting effects of COVID-19, as well as the loss of high-profile tenants such as Bank of America and BMO Financial to brand-new towers along the Chicago River.
Overall, pre-1950 buildings in the Loop have 35% vacancy, according to an Aspire analysis of buildings of 100,000 square feet or larger using CoStar data.
After several Loop buildings fell into financial distress, the city has provided financial backing for the conversion of some high-vacancy office buildings into affordable housing.
Yet just like the trophy towers’ outperformance of other modern buildings, Shannon said 25 E. Washington’s owners see an opportunity to rise above vintage competitors lacking fresh capital and high-end amenities.
Building improvements
Renovations in the building include lowering a light well in the middle of the building down a level to the seventh floor, where a new, 15,000-square-foot amenity center will include an open-air courtyard, lounge, game room, top-tier conference center and fitness center with top-of-the-line equipment.
The project, designed by Geniant Eastlake Studio, is expected to be completed in August, Shannon said.
“In the middle of this landmark Daniel Burnham building, you’re going to be able to walk into the middle of the seventh floor and be in outside space with trees, a pergola and outdoor seating,” Shannon said. “We believe we’re moving this building into Class A vintage.”
The building has landed a series of recent new leases, renewals and expansions.
ATS Institute recently expanded by 10,000 square feet, doubling its space, while Contract Office Installations renewed its 13,000-square-foot space, according to the landlord. New tenants include National Community Investment Fund, with 4,600 square feet; Millennium Counseling Center, 3,500; and Gertie Enterprises, 3,000.
The structure began as a men’s store annex to the huge Marshall Field & Co. building just across Washington. That structure, now a Macy’s flagship, is connected to 25 E. Washington on below-street levels, which also are connected to the Pedway underground walkway system.
Back in 2019, the 25 E. Washington owners invested $10 million to convert three lower-level floors into a new, 62,000-square-foot space for the School of the Art Institute of Chicago on a 15-year lease, Shannon said.
Like that deal, the big investment in amenities is an example of the already decades-long ownership playing the long game, he said.
“They’re not only bringing the capital, they’re bringing the confidence that this property is going to outperform the market,” Shannon said. “They believe it’s an investment that’s going to take the building from 85% leased to 95%, while driving up rents.
“We’re outperforming our space just the way the trophy towers are outperforming other glass-and-steel towers.”