Truman Tolefree’s Intersection Realty Group is jolting Chicago’s office-to-apartments conversion market with a play for a distressed Loop building.
A venture of Rochester, N.Y.-based Intersection, led by Tolefree and Chase Chavin, spent $19.3 million on the 24-story office building at 65 East Wacker Place with plans to convert it into 144 apartments, CoStar reported. The 223,000-square-foot property is mostly vacant.
It was sold by Acres Capital, which bought the building a year ago when its previous owners were facing a potential mortgage default.
The office tenants still in the building will remain under Intersection’s conversion plan, yet a majority of the building will be converted into apartments. About 46 percent of the building is leased to office tenants, and Chavin said more than half of the building would likely be converted.
Intersection plans to add a “rooftop amenity” to the building, he said. The total cost of the conversion will likely be greater than what the company paid for the building.
Mayor Lori Lightfoot has invited developers to convert outdated office buildings on and near LaSalle Street into residential buildings in an effort to restore foot traffic in the Loop. The city is offering tax increment financing plans to temporarily freeze property tax increases on improvements, amongst other public incentives, to developers of these projects as long as at least 30 percent of the units are affordable.
While the Wacker Place project is a few blocks east of LaSalle, Chavin said he plans to pursue historic tax credits for the 94-year-old building and request that Chicago designate the building a landmark, which would make it eligible for a Class L property tax incentive. The city has encouraged developers to take similar paths to gain financial viability for LaSalle Street residential conversions of offices.
The Wacker Place building has 23 tenants. As many of them are smaller tenants with floor plates under 10,000 square feet, Intersection will likely have to move them to create a contiguous block of the building that can be redeveloped.
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