Chicago developer R2 is walking away from a long-awaited development on a former Goose Island boatyard that would have epitomized the area’s evolution from its industrial roots into a mixed-use hub.
R2 last month sold a portion of the 3.5-acre site at 934 North North Branch Street to Chicago-based BA Investment Advisors for $5.8 million, effectively squashing a plan to build a dining and entertainment complex with restaurateur Brendan Sodikoff, Crain’s reported.
BA is led by Jeffrey Bernstein and Laurence Elbaum, the heads of Chicago-based commercial real estate brokerage Bradford Allen. Their investment arm has been one of the most active buyers of offices in suburban Chicago and across the U.S. amid the market downturn, and last year also purchased a vacant Goose Island office building that was formerly home of the Kendall College culinary school for $18 million.
R2 last year sold off the northwest portion of the Goose Island boatyard site to a venture of luxury car dealer Joe Perillo for $4.8 million. An R2 venture purchased the whole boatyard property for a little over $8.2 million in 2014.
The decision to sell the other piece to BA was driven by the need for recapitalization, R2 CEO Matt Garrison told the outlet.
Proceeds from the sale will be used to pay off loans tied to the site and redirected into a nearby project at 1001 North North Branch Street, where the firm aims to convert the former Peck & Hills Furniture warehouse into an “urban flex” building, catering to various potential users such as photography studios, fitness facilities or retailers requiring production space.
R2 had been planning to repurpose the former furniture warehouse into a 250,000-square-foot office building, but a beleaguered office sector that’s still climbing out from the pitfalls of the pandemic prompted the developer to pivot.
The dining and entertainment project was supposed to encapsulate the area’s seemingly imminent transformation, akin to Fulton Market in Chicago’s West Loop. However, Goose Island remains largely unchanged. That’s due to strict zoning regulations on all but its southeasternmost points and elsewhere along the North Branch Industrial Corridor, where the city in 2017 upzoned land and opened it up to new uses, prompting a wave of speculation by developers.
R2 has been juggling various sales and acquisitions over the last year. In January, the firm paid nearly $60 million for the 41-story, 655,000-square-foot office building at 150 North Michigan Avenue, down from the $70 million it was under contract to pay last June to mark an even larger discount from the $121 million the property fetched when it last sold in 2017.
More recently, a venture of R2 and Goldman Sachs sold the 40,000-square-foot REI store at 1422 North Kingsbury Street in River North that it converted from an industrial facility. California investor Tom Funke bought the building for about $20 million.
—Quinn Donoghue
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