The upper floors of a 10-story building in Chicago’s River North are set to be redeveloped from offices into 153 apartments in one of the largest projects of its kind to break ground in the city in recent years amid a national trend of conversions.
Local firms WindWave Real Estate and Path Construction said they completed the approximately $17 million purchase of the office portion of the building at 111 W. Illinois St. on Monday. The joint venture is backed by preferred equity from another Chicago-based firm, Landrock LP
The new owners plan to begin work this month on the $64 million conversion project, which includes the purchase price, according to Jon Cordell, who founded WindWave last year after leaving a Chicago development role at Lendlease. Residents are expected to move in by next summer, Cordell said.
CBRE, the world’s largest commercial real estate services firm, said Tuesday it expects U.S. office conversions and demolitions to exceed new construction of that property type for the first time in since at least 2000.
The 111 W. Illinois project stands out because it is relatively new office space, built in 2008, and because it is a larger conversion not including any public incentives.
The purchase includes office space on the upper six stories and ground-floor retail space leased to restaurant Roka Akor and Tarry Coffee. The acquisition does not include the second through fourth floors, which are owned by Erikson Institute, an institute of higher education.
“It’s a rare opportunity to create luxury apartments at well below replacement cost in the 98% leased River North multifamily market, with no other new developments planned,” Cordell told CoStar News. “This is really a unique canvas among the other office buildings that need to be converted to another use.”
The full project cost is less than the $75 million that the property last sold for in 2015, when office values were soaring and overall vacancy was far lower.
Discounted deals
It is the latest example of high-vacancy office buildings in Chicago and other large cities selling for fractions of pre-pandemic values as remote work trends have persisted more than five years since the onset of COVID-19.
The property was sold by Germany’s Manova Partners, a Munich-based real estate investment manager that last year was spun out from Australia’s Macquarie.
The building has been mostly vacant since Salesforce left to consolidate several offices in the city into the new, 60-story Salesforce Tower along the Chicago River.
“This is a thoughtful redevelopment that reflects how buildings can evolve for the next generation,” Ric Krause, president and CEO of Path Construction, said in a statement. “Our development team is excited to deliver a concept that blends lifestyle and location in a way that few projects can.”
Plans to convert the Illinois Street property come after a slowdown in multifamily construction in recent years because of higher construction and borrowing costs. The lack of new units relative to Sun Belt cities that were overbuilt has led Chicago’s rent growth to outpace many markets nationally.
That has led investors to seek out buildings, often vintage loft offices, to convert to residential rather than kicking off ground-up projects.
In high-demand River North, such projects include a 36-unit conversion planned for a loft building across the street from 111 W. Illinois that recently sold for the first time since it was built in 1913, and a proposal to switch a shoe factory-turned-office building at 223 W. Erie St. to 66 apartments.
City officials also have agreed to provide tax increment financing and other subsidies for projects in the Loop business district that will convert unwanted office floors into affordable apartments.
No affordable requirements
In the case of 111 W. Illinois, where existing zoning allows for a switch to residential, there are no requirements to create affordable units, increasing profits and making the project easier to finance.
Cordell said the 111 W. Illinois deal stood out because of the desirable location, cost basis, low multifamily vacancy in River North and a dearth of new supply on the way nearby.
“You could argue that this is not even an obsolete office building,” Cordell said. “This is just a better use.”
Path and WindWave plan building amenities including an indoor-outdoor fitness and wellness center, hospitality lounge, outdoor terrace, grilling stations, firepit, pet spa and indoor bike parking. There also will be coworking space converted from former WeWork offices in the building.
CoStar News first reported in August 2024 that another local firm, Chicago Development Partners, had an agreement to buy the property for about $17 million. It is unclear whether that firm, led by Howard Weiner, is still involved in the project or if it flipped the property.
Weiner did not immediately respond to a request for comment from CoStar News. Manova declined to comment.
Before creating WindWave, Cordell was an executive in the Chicago offices of developers John Buck, Tishman Speyer and Lendlease.
Most recently as director of development for the central region of the U.S. at Lendlease, Cordell was involved in the firm’s development of more than 2,300 apartment units in Chicago since 2018, including the Cascade and Cirrus towers within Lakeshore East and the Reed and Cooper towers along the Chicago River in the South Loop.
For the record
The seller was represented in the sale by Cushman & Wakefield brokers Cody Hundertmark, Tom Sitz and Dan Deuter.