A Brief History of Block 37

Block 37 gets sold, again, as the city’s cursed retail block limps along in the manner we’ve become accustomed to over the past few decades. Here’s a (sort-of) brief history of Block 37: “to know Block 37 is to know Chicago.”

Photograph: akasped (CC by 2.0)

Block 37 is under new management, again, with the hopes that it will “move forward after nearly three years of financial trouble that has resulted in a vacancy rate of 70 percent for retail space.” It could happen; the economy is turning around, if in the manner of supertankers. But I’m not waiting up—Block 37 has been a boondoggle for decades, and a 70 percent-vacant mall is practically a victory compared to the wrangling that’s gone on over the cursed space. (A colleague asked me if there was an Indian burial ground beneath it. No, just a burial ground for a $250 million express train station.)

How bad has it been? Ross Miller wrote a fantastic book on the debacle—worth reading for its portrait of how clout can fail—in 1996, calling it a “gold-plated hole in the ground.” Construction on the mall began a decade later. It’s an impossibly complex story, and Miller’s book is a highly recommended account of the first half of the story (it’s blurbed by Saul Bellow, Stanley Tigerman, and Harold Bloom!). But here’s the short of it (quotes from the Tribune unless otherwise noted).

* 1960s-1970s: As the Rust Belt and industrial Midwest collapses, cities go on Great Society building sprees while casting about for the new industries that will carry them through the second half of the 20th century. For Chicago, where futures trading had grown up along with its status as stockyard and agricultural hub, white-collar industries like finance, law, and advertising are an obvious choice. As Miller writes, “Chicago was asked to compete on more equal terms with every other city in the world for its share of the giant corporations and financial institutions that meant the difference between continued progress and economic ruin…. [Daley] concluded that skyscrapers could be the steel mills of tomorrow. The very commercial architecture Chicago had pioneered might hold the key to its economic survival.”

Basically, “slum clearance” shifted from housing to commercial structures.

* 1973-1975: “Chicago 21,” the city’s plan to redevelop the Loop, is conceived by Skidmore, Owings & Merrill. As the Tribune reported at the time, it called for razing “about half of the 52 buildings in the area bounded by Wacker Drive on the north, State Street on the east, Washington and Randolph streets on the south, and Dearborn, Clark, and La Salle streets on the west.” Basically, the heart of the loop west of State. It also included “South New Town,” which would have brought “buildings and townhouses for 60,000 persons by 1985 and 120,000 by the 21st century.” Some of it came to pass, like the Harold Washington Library and the ill-fated State Street transit mall.

The driving force behind Chicago 21? Tom Ayers, ComEd CEO, confidante of Da Mare, and father of Bill Ayers. (Tom Ayers’s son would later be an informal consultant to Mayor Daley’s son, Mayor Daley. It’s a small town.)

* 1976: Mayor Daley dies. Michael Bilandic takes over. Jane Byrne follows. The momentum for bringing down an aging commercial block like Block 37 was there thanks to Chicago 21, but as Miller writes, the two not-Daleys “created a power vacuum that put the whole North Loop up for grabs.”

* 1979: The North Loop Blighted Commercial District is established.

* 1979-1980: The plan to fix the “blight” in the North Loop includes federal money for land clearance, as well as tax breaks. This includes use of a new ordinance that allows the assessor to tax commercial development in “commercially blighted” areas at 16 percent of market value instead of 40 percent, for 13 years. The assessor, Thomas Hynes, refused to play ball, delaying redevelopment further.

* 1983: City Council and the new administration of Harold Washington set up the city’s first Tax Increment Finance district. The Tribune, in a piece entitled “Schools sacrifice in Loop plan,” reported that “administration officials hail TIF as a way for the project to finance itself without adding to the tax burden on homes and businesses in the neighborhoods.” The TIF is set to expire in 2007. FJV Venture gets $24 million to develop the site.

* 1984: After having allowed many like it to come down, the city designates the 112-year-old facade of the McCarthy Building, a small corner building (12,000 square feet, housing 60 workers) with a diverse mix of commercial tenants, as a landmark. It was also, as Miller notes, “dense-pack capitalism… wildly profitable for nearly half a century.” In 1989, when Block 37 finally started coming down, the Tribune’s John McCarron wrote a lament for Block 37 that captures the “dense-pack” spirit of the area:

Block 37 is the epicenter of the North Loop urban renewal project, the city’s 12-year, billion-dollar campaign against raunch and honky-tonk. Gone will be the pulse of discount stereo shops; the smell of caramel corn; the complete steak dinner for $3.69. Enter the mixed-use development; the elevator lobby; the “information and security” desk.

Gone too will be some of the Loop’s walking-around fun . . . which is why old Block 37 begs one last look.

[snip]

On the other side of 37, inside Designer Mart, formerly the Stop & Shop grocery at 16 W. Washington St., owner Leonard Begun vowed to keep on discounting until the wreckers show up.

Working his way among tables heaped with 75-cent men’s dress socks and $1 pantyhose, Begun barked orders like a Civil Defenseman conducting an evacuation. “Get these marked, will ya?” he implored a stockboy before turning his attention to a customer fingering one of those wide-brimmed black hats favored by Zorro.

“Take another $5 off, honey. All short people get breaks today.”

Basically, Block 37 was a less extreme version of what Times Square used to be—cheap rents, cheap stores, cheap (and sleazy) movies—in the heart of the city. But the somewhat inexplicable decision to award landmark status to the McCarthy Building (not especially notable, just really old) pushed the destruction of Block 37 back farther.

* 1987: City Council strips the McCarthy of landmark status. The Landmarks Preservation Council sues. Harold Washington dies.

* 1989: The LPC loses the lawsuit; Mayor Daley takes over; Block 37 comes down. We are now a decade from the initial designation of it as “blighted.” Having paid $40 million for it, the city now trades the title for $12.5 million.

* 1989: The Tribune reports: “The developers estimate that Block 37, which produced $1.5 million in real estate taxes in 1982, will provide $15 million annually by the year 2000. The project also should generate $9 million a year in sales tax revenue once the retail portion opens in 1992.”

* 1990: Demolition is completed. Miller writes: “Then on February 12, 1990, the United States comptroller of the currency issued a warning to the nation’s bank presidents that they could be holding large nonperforming real estate loans…. Within a few months, trillions invested in real estate nationally had deflated by 20 to 50 percent.” The Trib reports that financing on the project is “impossible.”

* 1991: Gallery 37 is put in the vacant lot.

* 1992: Block 37 gets an ice-skating rink, “Skate on State.”

* 1997: The owners of Block 37 propose a $200 million multi-use project. The city Planning Commissioner is less than impressed:

Under its redevelopment agreement with FJV, he said that City Hall had “many remedies.” Under one, the city could go to court seeking to regain ownership of the prime parcel, bounded by State, Dearborn, Randolph and Washington Streets.

* 1998:

City officials have rejected the latest development proposal for a vacant block of prime land in the Loop, contending the plan “rather modest and too small and not exciting enough for State Street.”

[snip]

An earlier proposal by the development partnership, which included plans for a complex anchored by a Macy’s department store, died after the city rejected Macy’s request for a subsidy of more than $55 million.

* 1999: Rents on State are at a nine-year high; Sears gets $13.5 million from the city for its store.

* 2000: “The Daley administration and real estate developer JMB Realty Corp. have reached an agreement on plans for the site, including a city subsidy of $39.5 million that sets the stage for the mixed-use project to include a Lord & Taylor department store, sources said.”

* 2000: The project goes back to the drawing board: “Minor said the developer has promised to make it easier for the public to reach the rooftop garden that will be built atop the project’s Lord & Taylor department store and is likely to ditch the rough-hewn, flagstonelike limestone that was to have clad the store and make it resemble a 1950s shopping center.”

Blair Kamin describes it as “a glassy hotel-condo tower atop a Lord & Taylor department store that recalled Skokie, circa 1950.”

Which I would have dug, but I really like Skokie. (And Berwyn.) This is why I am not Mayor.

* 2001: Blair Kamin: “The new plan for Block 37, the long-vacant city block in the heart of the Loop, is so much better than the one unveiled last April that Chicagoans ought to petition Federal Reserve Chairman Alan Greenspan to keep lowering interest rates.”

* 2001: The city takes Block 37 back: “After a series of setbacks over the years, FJV announced plans for a $251 million complex in April 2000, when the economy was booming, the real estate market robust and financing available. But the joint venture was unable to get the project under way–in part because the city demanded new architectural plans–before the economy’s recent downturn.”

* 2003: “The city expects to sell the 2.7-acre site to Arlington, Va.-based Mills for less than the $32.5 million it paid to take back the property from the previous developer, Planning Commissioner Alicia Berg said.”

* 2004: “The city has agreed to sell Block 37 at a loss of nearly $23 million to assure development of the long-vacant, but critically important downtown site, officials announced Tuesday.”

* 2004: “The CTA is applying for a $48 million federal loan to help finance a transit superstation on the long-vacant Block 37 downtown, transit agency officials said Monday…. Express trains to O’Hare International and Midway Airports would serve the $213 million station development, bounded by State, Randolph, Dearborn and Washington Streets.”

* 2005 Headline: “City giving the green light to Block 37 project–for real”

* 2006: “Mills Corp. on Monday began construction of the approximately 265,000-square-foot retail portion of the long-awaited, mixed-use project at 108 N. State Street in the Loop, previously called Block 37…. Bryant said a $2.9 billion investment earlier this year from Goldman Sachs allowed Mills to pay off some of its heavy debt burden and ‘advance all of our development projects.’”

* 2006: “On Tuesday, the troubled Mills Corp. of Chevy Chase, Md., which was developing Block 37, agreed to sell the retail and transit portions of the $450 million project to developer Joseph Freed and Associates of Palatine.”

Mills had been under investigation from the SEC; its CEO stepped down and receives $2.5 million, with $10.5 million promised if the company is bought before the end of 2007.

An analyst at RBC capital markets remarks that it “seems somewhat excessive given the company’s fall from grace.”

* 2007-2008: The economy collapses, mostly because of real estate shenanigans.

* 2008: “City Hall is planning another subsidy for Block 37—this time a three-phased bailout of an el station under construction there that’s running more than $100 million over budget.”

* 2009: “Earlier this month, a Bank of America-led group of lenders moved to foreclose on Block 37, claiming Freed essentially ran out of money to complete construction. Freed is contesting the lawsuit.”

* 2010: “Block 37 mall developer Joseph Freed and Associates lost a court appeal to keep possession of the high-profile, financially strapped downtown retail project, paving the way for foreclosure proceedings to move forward.”

* 2010: Onion headline (the A.V. Club, not the satire part): ”Bizarre Chicago shopping: 6 reasons why walking through Block 37 feels like stepping into The Twilight Zone”

* 2011: “Block 37, the star-crossed shopping center in the Loop, was sold at a sheriff’s auction Wednesday to Bank of America for $100 million, less than half the amount of an outstanding construction loan that sent the property on a path to foreclosure more than a year ago.”


And that takes us up to the new sale of Chicago’s most ill-fated plot of land.

Did I say short? That is short. As mentioned, Ross Miller’s fascinating book Here’s the Deal goes through to about 1995, after which it would be more than a decade until ground was struck on the project. Which would then be followed by one development company selling to another development company because it was running out of money while being pursued by the SEC, and then that second development company being foreclosed on.

So, again: why is it so cursed? Aside from the waste and the legal wrangling, a big part of it is just terrible timing. The project was supposed to get off the ground in the early 1990s, and then the real estate market shrunk. It almost got off the ground again in 2001, and the economy shrunk again. When it finally did get built, the economy collapsed, taking down consecutive developers and leaving the city with a mostly-empty mall during a period of high unemployment.

What’s there isn’t much, but also a lot: what Miller calls “the history of the American downtown in microcosm…. To know Block 37 is to know Chicago.

 

Share

Advertisement

Comments to this blog are moderated. We review them in an effort to remove foul language, commercial messages, and irrelevancies.

Submit your comment