A 211-unit office-to-apartments conversion in Chicago’s financial district is for sale in a test of investment sales demand as a wave of similar projects is set to follow in the city and other U.S. downtowns.
CBRE brokers have been hired to sell Millennium on LaSalle, a 14-story building at 29 S. LaSalle St., according to a brochure.
The offering comes after the Florida-based developer of the project lost it to foreclosure last year, offering a cautionary tale about the challenges of converting historic buildings.
But efforts to sell it come amid some tailwinds, with a dearth of new construction in the Chicago area in recent years pushing up rents and leading to a burst of investment sales.
How the offering is received by real estate investors could provide a preview of sorts for the years to come, after a city-backed initiative to turn outdated office space into affordable apartments launched with a 117-unit partial conversion of the office building at 79 W. Monroe St.
That program, backed by significant public subsidies, is designed to eliminate vacant office space on and around LaSalle and to address a shortage of housing. To take part in the program, developers must set aside at least 30% of the converted units with below-market, affordable rents.
Millennium on LaSalle predates that program, but the sale process could provide a gauge of investor appetite as projects to convert parts of buildings such as 111 W. Monroe St., 208 S. LaSalle and 30 N. LaSalle also move forward.
The property at 29 S. LaSalle differs because it didn’t have affordable requirements.
$74 million foreclosure suit
The property was converted by an affiliate of Florida-based DLC Residential, but that firm was hit with a nearly $74 million foreclosure suit by an affiliate of Barings in 2023, Crain’s Chicago Business reported at the time.
The project began in 2019, but COVID-19 arrived during construction, significantly reducing the number of people working in or visiting the Loop business district. The project was completed in 2021.
After filing the foreclosure suit, the Barings affiliate seized the property last year and took out a $29.35 million loan from Webster Bank, according to Cook County property records.
Land beneath the building is owned by the University of Chicago, meaning the multifamily owner makes ground-lease payments that cut into profits from rental revenue, according to property records. Barings assumed the ground lease when it seized the property, according to public documents.
It’s unclear how much Barings is seeking in a sale, and the global investment management firm did not immediately respond to a request for comment from CoStar News.
Price estimate less than development cost
The property could sell for less than half what it would cost to develop today, according to the CBRE documents. CBRE says the property is 95% leased, with rental concessions set to burn off and in-place rents below market rate, providing potential upside for rent growth.
The offering is billed as an entry into the Loop near Google’s redevelopment of the Thompson Center, JPMorgan Chase’s overhaul of its 60-story namesake tower and expected population growth from ongoing and upcoming office-to-residential conversions.
Millennium on LaSalle has indoor sports courts and a rooftop pool.
The tower opened in 1902 as home to National Life Insurance Co., before later becoming known as Barrister Hall as the longtime home to the Chicago Bar Association and several law firms.
For the record
The seller is represented by CBRE brokers John Jaeger, Justin Puppi and Jason Zyck.