Old Main Post Office fetches $40 million
(Crain’s) — A bidder agreed at an auction Thursday to pay $40 million for the Old Main Post Office.
The couple signed a contract and paid $250,000 in earnest money, the spokesman said.
The couple said in a statement that they plan to “re-energize the property as a focal point and destination for the entire city and its visitors for the next century.”
The winners said they weren’t ready to discuss their plans but look forward to working with Mayor Richard Daley, the local alderman and city staff on the project.
“To paraphrase Daniel Burnham,” the couple said in the statement, “let me assure you that we shall make no small plans.”
The roughly 3-million-square-foot building at 433 W. Van Buren St., which straddles the Congress Parkway, was built in 1921 and has been vacant for more than a decade. It’s the biggest property owned by the U.S. Postal Service.
The winning bidders must put down 10% of the bid price — $4 million — in three days, and are to close on the purchase by Sept. 30, according to terms of the contract.
The auction was held in a small conference room at the InterContinental Chicago O’Hare Hotel in Rosemont. About 125 people attended, with the majority standing around the room without bid paddles. Rick Levin & Associates Inc. conducted the sale, and beforehand principal Rick Levin said more than a dozen bidders had registered.
Of course, the winning bidders now have to put together financing for the $40-million purchase in a market where few lenders are willing to provide money for development projects. There are also operational costs that have run the postal service about $2 million annually, and a major unknown in property taxes. The postal service, as part of the federal government, doesn’t pay tax on the building.
Bidding began around 1:15 p.m., with a suggested opening price of $300,000. When the price exceeded $10 million, competition dropped down to the couple and another group led by Chicago lawyer Nathaniel Hsieh, who later said he has a so-called “investor immigration fund” with investors from China and Russia.
The fund gets money from foreign investors who are able to obtain green cards for U.S. citizenship if they spend a certain amount of money on a U.S. project that creates a certain number of jobs here. Mr. Hsieh said his Investor Immigration Funds Inc. has ties to a New York group and has been looking for other projects.
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The U.S. Postal Service said in June that it planned to auction the building, after a deal to sell it to Chicago-based Walton Street Capital LLC fell apart. Walton Street first had it under contract roughly 10 years ago.
Related story: Walton Street’s deal for Old Post Office falls through
A source who’s familiar with Walton said the company didn’t send any representatives to the auction.
There were a handful of notables at the auction from the Chicago commercial real estate scene, including Christopher Carley, who first proposed renowned architect Santiago Calatrava’s Spire building. The Spire project was subsequently taken over by another developer.
Mr. Carley, CEO of Chicago-based Fordham Co., said he was at the auction purely for entertainment.
He joked beforehand on taking bets whether the sale price would be over or under $10 million — and was taking the over.
“I think with the right formula it can be a real asset to the city,” Mr. Carley said. “Downtown is so strong, but that southwest corner is lacking and needs something.”
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I would be interested in knowing who the other bidders were. Something like an ebay bid history might be nice. Also, it might be nice to know what the other bidders were thinking/planning for the building that would have supported their bid amounts.
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I don't thin we'll hear about a lender, though.
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We need to know what actually happened with Walton Street's deal. Did they actually pay their $30 million dollar offer? Was there earnest money? Was there forfeited earnest money and if not, why not?
The city was willing to kick in $51 million in TIF monies, for what? Was that to pay for environmental issues? Bluhn was planning on knocking down a goodly portion of the building; is it on the historical list? Was the City going to let him knock down big chunks of such an iconic structure?
Bluhm/Walton Street offered $30 million 10 years ago. $40 million today seems like it might be a lesser amount in 1999 dollars. Any plans by the Post Office to sue Walton Street for the difference in Present Values? How about the accrued carrying costs the Post Office paid while Walton Street dithered? Would like a lot more in depth answers and maybe some sign that Crains has connections and can produce an in-depth article from sources only they have access to.
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http://chicagoismynewblog.wordpress.com
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1) My guess is very few people would want to live in that building based on its size and location. Consequently, if you were to take a section of it and convert it to artists work/living lofts, galleries, and studios, it would be helpful in diversifying that area of the loop. Plus, neighborhoods don’t get interesting until they’re populated by the creative types. Offer them at slightly lower cost as long as feasible, along the lines of the Flatiron building in Wicker Park or the Gallery District along Halsted in Pilsen.
2) Build a slick but affordable boutique hotel for friends of said artists, and general city visitors (thinking along the lines of the Standard Hotel in LA or the QT in New York). I think one of the four main “towers” would probably be sufficient space for this.Would be great to have a roof-top pool/bar area for reasons that I will mention…
3) Loft-inspired office space along the lines of what they did at 600 West Chicago would be quite attractive in the area, particularly to (remaining) trading firms with proximity to the CBOE and CME.
4) Daley wants to make Chicago a fashion mecca, and at present I don’t believe there’s really an outlet for that. Set up first floor retail with local Chicago designers. Perhaps mix it with more mainstream shops for variety.
5) Lastly (and this is the big draw), cut out the majority of the middle of the building, and make this a garden/”urban forest”—something really impressive that for the most part makes you forget that you are in the city. What I like about this idea is that it could potentially be a great gathering place for workers meeting for lunch etc., and would in effect draw people in from the outside. This could work very well in supporting the retail component. Perhaps on the first level, have restaurants and lounges ringed on the outer edge of the garden, and of course above you have offices, hotel rooms, art galleries, artists’ lofts all looking out onto a tranquil urban forest…
Yes, I know this sounds like it could end up being fairly pricey, but for a project this size you need to inject a fair amount of capital for this to be successful.
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I can easily see a scenario in which the old beast sits and rots for a few more years while these "investors" try to get their visas. Then the whole thing will have to get sold once again.
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