|Photograph: Nathan Kirkman
|“This [site] has had its share of curses,” acknowledges one local civic leader|
The clamor of construction drifts over Block 37, the long-vacant patch in the heart of the Loop. Peer through narrow slots cut in the wood fence and you will see work crews, a giant drill, earthmovers scraping and clawing the dirt. For nearly 20 years, while buildings have been going up all over downtown Chicago, the silence has been deafening on Block 37, the empty, 2.75-acre parcel between the Daley Center and Marshall Field’s (now Macy’s). Despite grandiose plans and city hall’s conviction that the site represents a development gem, nothing has happened-until now.
If the current activity is to be believed, a vibrant new complex of stores, offices, restaurants, and apartments will spring up atop an underground CTA station, and the project-costing hundreds of millions of dollars-will start coming online in 2008.
But after all the false starts, dare we believe it?
“I can tell you a hundred times that it’s going to happen. But people will still say, ‘Show me,'” says Steven Jacobsen, the point man for the chief developer of Block 37. “We’ll show you.”
“In real-estate markets, there can be a cursed site-and this one has had its share of curses,” says MarySue Barrett, president of the Metropolitan Planning Council, a nonpartisan group of business and civic leaders who promote the regional economy. “Now, the challenge is moving beyond the plague.”
Those backing the latest development effort are vowing the site’s extended run of bad luck is over. They contend that the current plan improves on its predecessors, and they insist that the money is coming in to support it. A host of substantial players are putting their reputations behind the project, as well as the financial muscle of their organizations: Frank Kruesi, president of the Chicago Transit Authority; Joe Ahern, president and general manager of WBBM– Channel 2; Joe Mansueto, chairman and CEO of the investment research firm Morningstar; CEO and president Michael Newman and executive vice president Lee Golub of Golub & Co., a Chicago developer; and Jacobsen, a senior vice president of Joseph Freed & Associates LLC, a shopping mall developer based in Palatine. Freed is replacing the financially ailing Mills Corporation, which had been the project’s master developer since 2002. When Freed took over from Mills, it brought on Jacobsen, who had held the point man role with Mills.
The city maintains that a developed Block 37 will restore the site to its former financial vigor and drop a thick annual wad into Chicago’s tax coffers-the city’s planning department estimates $17.5 million a year from sales, hotel, and related tax revenues, once the project is fully functional.
For most of Chicago’s history, Block 37-the name comes from the official plat designation-provided a financial heartbeat to the city. In his 1996 book, Here’s the Deal: The Buying and Selling of a Great American City, Ross Miller points out that the thriving parcel was rebuilt immediately after the Great Fire of 1871 at four times its original square footage. Block 37 then flourished for nearly a century before falling into decay during the 1960s, when Chicago’s urban core lost businesses and people. In 1989, the city ruled that the site was “blighted” and ordered its buildings razed so the parcel could be redeveloped. Since then, a wish list of projects has emerged: a 100-floor mega-tower, a world-class retail complex anchored by a Macy’s or Lord & Taylor, a luxury hotel/condominium resort. There were even rumblings that Mayor Richard M. Daley wanted to plant a casino there. Nothing happened. The site found some use as a makeshift art gallery and skating rink, and by the late 1990s, some editorial writers and civic activists were floating the idea of keeping the block open to the public permanently.
Finally, in 2002, the city bought Block 37 from a private development team led by JMB Realty for $32.5 million and selected Mills, a Maryland-based shopping center specialist, to develop it. That threatened to turn into a fiasco over the past year, as Mills faced deepening financial problems. (The company is under a Securities and Exchange Commission investigation related to accounting irregularities and earnings restatements.) In August, the Golub company agreed to buy a major chunk of the venture, and in November Mills agreed to sell its remaining interests to Freed. (Mills executives would not comment for this story.)
“There’s always concern when you take over from another developer,” says Jacobsen. “But I know this project, and I can point out the risks we need to be aware of.”
Though Mills is leaving, much of the company’s original blueprint for the site remains. Jacobsen says the current plan calls for a retail and entertainment base, surrounded by office and residential towers, and an underground CTA station designed to provide express train service to O’Hare International Airport and Midway Airport. Golub is responsible for building the office portion, a 16-story, 440,000-square-foot structure that will be anchored by WBBM– Channel 2’s on-air TV studio and by Morningstar’s headquarters. (Plans for a hotel have been scrapped.)
Meanwhile, Freed takes over construction of the four-level retail and entertainment complex and the CTA station. Golub also has the “air rights” above that retail portion with plans to develop two residential towers, one a condo building of 365 units and the other a rental building with 420 apartments.
Lori Healey, commissioner of Chicago’s Department of Planning and Development, says she’s confident Freed and Golub can attract the required tenants and financial backing-two tasks that thwarted previous Block 37 wannabes. What’s more, the project will be built in phases, each getting under way only after a critical mass of retail, office, and residential tenants commit.
For example, the office building is being built on the strength of the leases with Morningstar and WBBM–Channel 2 (the latter must move out of its old McClurg Court studios to make way for a new apartment tower that Golub & Co. plans to build). Those two tenants will fill about 70 percent of the office structure. “That was crucial to getting something going right away,” says Lee Golub. Similarly, commitments from the CTA and a handful of store chains emboldened Mills to begin construction of the retail and entertainment portion.
Healey and the developers point out that the pay-as-you-go approach differs fundamentally from the strategies of previous Block 37 efforts. Prior plans were designed to be built in one swoop and depended mostly on a giant tenant, such as a Macy’s or Lord & Taylor, to lure additional retail, commercial, and residential tenants. “The city learned its lesson-give the master developer the opportunity to build its markets,” says Healey. “Not everything comes together at one time.”
Oddly enough, past inertia may also work to the advantage of the current project. At the beginning of its redevelopment saga, Block 37 was considered vital to reviving the tired downtown. Now, with the help of a 1983 tax increment financing district, which defrays some taxes to encourage development, the downtown has been reenergized. Live theatres have sprung up around the site (the long-running Wicked is playing at the Ford Center for the Performing Arts/Oriental Theatre, across the street), Millennium Park is only a stone’s toss away, and with the construction of dormitories used by nearby colleges, a growing number of young students hang around after hours. In addition, new downtown condominiums and rental units house residents looking for stores, restaurants, and entertainment nearby. “It’s remarkable the Loop has done so well, considering this site has been a missing tooth,” says the MPC’s Barrett. “We all tolerated that long city-block walk through nothingness.”
|Illustration: © The Mills Corporation
|Artist renderings of the buildings planned for Block 37. “People are going to say, ‘Wow!'” promises one of the site’s developers.|
The construction now under way primarily builds the $213-million CTA station that will whisk travelers directly to O’Hare or Midway. That check is being picked up by a mix of public and private enterprises: the CTA ($130 million); the City of Chicago ($42 million); and Freed ($41 million). The CTA gets control of the station, so Freed does not generate any income from those operations. It does, however, own the station’s nearby retail space and will rent it out.
This isn’t supposed to be your average subway stop. For example, passengers may be able to check their bags for their upcoming flights in advance at Block 37. Trains will have luggage racks and wider seats, according to the CTA. A Block 37–to–O’Hare trip would take 45 minutes, and maybe as little as 30 minutes to Midway.
Current trains can be retrofitted to accommodate luggage; no new cars have been ordered, according to the CTA. The airport-bound trains will run on existing Blue, Red, and Orange Line tracks and go directly to the airport. Eventually the CTA could build additional tracks to speed up the ride, the agency said.
This new hookup is scheduled to start in 2008. Who will use it? CTA’s Kruesi envisions a combination of business travelers and tourists, who are willing to pay an estimated $10 ticket (much higher than the $2 regular subway fare but cheaper than a $40 taxi fare) for a quicker ride.
Critics argue that the CTA should be spending its money on improving existing services and infrastructure, not on a futuristic Loop terminal specifically for airport users. This past October, a Crain’s Chicago Business editorial tarred the venture as “ill-conceived.”
Kruesi counters that if Chicago is going to wrest its share of global tourism and commerce from other international cities, then it must invest in a faster, more efficient way to connect travelers with airports. “It’s really a new concept in the United States,” he says. “But major connections to airports are a really important part of what makes a city go and makes it an attractive destination point.”
The WBBM–Channel 2 operation, which is expected to move in in 2008, will occupy about 100,000 square feet at the corner of Washington and Dearborn streets. Within that space the station will operate a street-level, on-air studio-a fishbowl approach already used by WLS–Channel 7 (on State Street south of Lake) and WMAQ–Channel 5 (at Pioneer Court, south of Tribune Tower). Ahern thinks his address has its advantages. “Having a venue with a streetfront studio that faces Daley Plaza and the Picasso is a great way to start your day as a viewer,” he says. The Channel 2 corner will be abuzz with large video displays, showing news, sporting events, and entertainment programs. Electronic billboards will provide 24-hour news headlines, and Channel 2’s weather operation will also be showcased.
As for the rest of the office tower-a Morningstar spokesperson says the company hasn’t changed its plans since Mills gave way to Golub; it expects to move in in 2008.
While the CTA, Channel 2, and Morningstar commitments bring this Block 37 project farther along than any of its predecessors, there are still a lot of unanswered questions. Among them: what the overall project will look like and who will be the other tenants. The architectural firm Perkins & Will is the master planner for the project. To date, the most definitive look at the complex and its tenant mix is on the Mills-backed Web site (www.108northstatestreet.com), which offers renderings and a listing of eight announced tenants, ranging from the retailers Andrew’s Ties and Banana Republic to Gibsons Steakhouse to Lucky Strike Lanes, the upscale bowling alley and lounge company. Some real-estate sources expect a health club will join the plan, too. (Freed is now reconfirming the tenant commitments.)
For this development to succeed, it will require “an interesting mix of retailers, not something found in every suburban mall in the country,” says Bruce Kaplan, founder and president of Northern Realty Group, which closely monitors State Street’s retail vacancies and whose office overlooks Block 37. He adds that the blend needs to include a couple of well-known, national store chains to generate customer traffic. “Independents look at chains, curse them, and then follow them into the space,” he says.
Just as important, the project has to be a magnet to the surrounding community. “It requires a good, rational pattern, where people can go floor to floor without walking a full city block,” Kaplan says. “And a great public space, enclosed but with a lot of light and energy to encourage people into using it, almost like a public park.”
At least one expert on urban spaces is skeptical that the current plans live up to the site’s potential. Brent D. Ryan, codirector of the City Design Center and assistant professor of urban planning and policy at the University of Illinois at Chicago, looks to successful models such as Rockefeller Center and the revitalized Times Square, both in New York City. “You would like [Block 37] to be transformative for the city, something that creates new public space and new images,” says Ryan. “That doesn’t seem to be happening yet.”
“I couldn’t disagree more,” says Jacobsen. “This site has an incredible transit station, a one-of-a-kind backdrop in the Picasso-and the exterior of this building is not going to be the same old design. It’s already got the ingredients.
“A year from now,” he vows, “people are going to say, ‘Wow!'”