New money behind plan to build Lake-Canal tower on spec
BY DAVID ROEDER and FRAN SPIELMAN Staff Reporters May 16, 2012 12:28PM
Rendering shows a planned 45-story office tower at 444 W. Lake, along theChicago River. submitted image | Sun-Times
Updated: June 29, 2012 9:06AM
Developers joined with Mayor Rahm Emanuel to announce revised plans Wednesday for a 45-story office building in the West Loop, portraying it as a sign of growing confidence in Chicago and a pro-business attitude at City Hall.
But the project was made possible by a new ownership structure with a deep-pocketed partner. The developer, Hines Interests LP, and landowner Larry Levy have been joined in the deal by Montreal-based Ivanhoe Cambridge, one of the 10 largest real estate firms in the world.
They plan to build the tower “on spec,” or without any committed tenants. After the financial crisis of 2008, Hines and Levy couldn’t build the tower even when they had a deal for an anchor tenant.
The tower will go up at 444 W. Lake, the northeast corner of Lake and Canal and the site of a surface parking lot. A groundbreaking is promised late this year and completion is estimated in early 2016.
It will be downtown’s first new office space since 2010 and the first speculative office building in the city since 1998. Emanuel said it will be only the third new office tower in an American city since the financial crash of 2008.
“It’s a vote of confidence in the Chicago economy,” said Emanuel, glorying in an announcement that coincided with his one-year anniversary in office. The building, called River Point, is expected to generate 1,000 union construction jobs, 3,400 permanent office jobs and a 1.5-acre riverfront park for the public.
Ivanhoe Cambridge said it invested $300 million in the deal. The park will get a $29.5 million public subsidy from tax-increment financing, and Emanuel said the building should pay $175 million in taxes over 15 years.
The project will result in a deck over Metra and Amtrak tracks that feed Union Station. Similar “air rights” buildings have been constructed without disrupting commutes.
C. Kevin Shannahan, senior managing director of Hines, said the prior version of the project needed third-party construction financing that became impossible after the financial crash. He said the Ivanhoe Cambridge investment means the work can proceed without construction financing.
The building was designed by the firm Pickard Chilton. It has been downsized slightly from the project’s earlier incarnation, and a proposed hotel has been jettisoned.
Downtown Ald. Brendan Reilly (42nd) defended the subsidy, which was carried over from a 2008 zoning deal approved under former Mayor Richard Daley.
Reilly said he used the “but for” test that he applies to all downtown projects. That is, “but for” the TIF subsidy, could the project move forward? His answer was no, that the numbers “just didn’t work” without public help.
“It’s a substantial amount of money. But it’s an incredibly complex project that spans a number of railroad tracks. It’s no small engineering feat to deck over an active railway. The ventilation alone is incredibly costly,” Reilly said.
“Without this TIF assistance, a project like this could not move forward and we wouldn’t have a beautiful piece of open space to show for it. It will be privately maintained in perpetuity, but will be a public amenity to be enjoyed by all.”
The project’s investors lauded Emanuel for bringing city department heads together in recent weeks to ensure it can be launched with little red tape. Levy, chairman of Levy Restaurants and a longtime property investor here, said, “There has never been a better time to be in business in Chicago. We have a mayor that is so pro-business, pro-entrepreneur.”
He added later, “There is something in the air right now. I’ve never seen more startups.”