A high-profile Gold Coast development site has traded hands at a sharp markdown — less than two-thirds of its 2019 purchase price.
Convexity Properties, the development arm of DRW Holdings, picked up the corner parcel at 1120 and 1130 North State Street for $39 million from Newcastle Investors, which paid $61 million in 2019, Crain’s reported.
The nearly 31,000-square-foot property — home to a long-shuttered Barnes & Noble and a Lou Malnati’s restaurant — is entitled for a 304-unit, 29-story apartment building. Newcastle secured approval in 2021 after scaling back its initial 42-story proposal, which drew pushback from Ward 2 Alderman Brian Hopkins and neighbors. But the developer never started construction and has now exited at a loss of roughly $22 million.
It’s unclear what Convexity will do with the site, though the acquisition expands its Gold Coast footprint, and zoning entitlements are typically in place for six years. The firm owns the adjacent Viceroy Hotel, a 180-room property that opened in 2017, and has been an active player in upscale redevelopment near Mariano Park.
Recent projects nearby include the Newberry on the Triangle retail revamp at 1030 North State Street and a wave of restaurant investments that have reinforced the district’s draw.
For Newcastle, the sale marks a rare retreat in a neighborhood where it has been an aggressive residential developer. Its Gold Coast track record includes the 35-story Bernardin apartments at 845 North State Street and an 89-unit building at 1210 North State Parkway.
The discounted deal highlights the challenges developers face when timelines collide with shifting conditions. While Newcastle managed to win zoning approval after redesigning its plan, the company may have balked at moving forward amid high financing costs and inflated construction costs.
Convexity has a track record of repositioning properties in prime locations and could opt for something other than the approved apartments.
— Eric Weilbacher
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