John Novak is rapidly ascending the ranks of Chicago developers by striking a deal to buy the troubled southern portion of Lincoln Yards from JP Morgan Asset Management and Sterling Bay, following the sellers’ failure to bring a massive commercial real estate plan to fruition.
An affiliate of Novak’s contracting firm, Novak Construction, is moving forward with the acquisition of 18.4 acres of vacant riverfront land where Chicago-based Sterling Bay had proposed a huge mixed-use campus. It’s just west of the empty life sciences building Sterling built at 1229 West Concord Place, John Novak and his firm’s executive vice president of development, Jake Paschen, told The Real Deal.
While they declined to comment on the price of the acquisition, they confirmed it’s well below the roughly $200 million Sterling and JP Morgan spent to assemble the parcels during the 2010s, as well as to prepare the parcels for development and carry them since then, according to people familiar with the project.
“I don’t know if this is at the bottom of the bottom, but I think there is more room for upside here than downside,” Novak said. “We just need to figure out what will be the best value and use of the land.”
Novak expects to close before the end of 2025.
The deal brings a new face to a site that has become synonymous with development struggles in Chicago. Real estate insiders frame the acquisition as a distress sale, reflecting the difficulty the current owners have had in moving forward with the large redevelopment plan. The land, part of the larger, ambitious $6 billion mixed-use Lincoln Yards development, has been the subject of intense scrutiny and is changing hands as the original vision dissipated over the last two years.
The planned purchase marks the second time this year that a deal for the southern portion of the site has been put together, underscoring the urgency with which JP Morgan and Sterling Bay are now offloading the property. The first attempt to sell the site earlier this year to developers JDL and Kayne Anderson, at a price Chicago real estate sources pegged at about $60 million, ultimately fell apart.
That deal disintegrated after JP Morgan balked on completing the transaction, leaving the future of the parcel uncertain until the recent emergence of Novak. Kayne and JDL this year formed a development team to buy the northern 30-plus acres of Lincoln Yards from Bank OZK, which stripped that assemblage from Sterling Bay and its other partner, Dallas-based Lone Star Funds, through a deed in lieu of foreclosure. JDL and Kayne have since sought Chicago City Council approval to build more than 3,700 residential units on that stretch, which sits on the other side of the Chicago River from Novak’s planned purchase.
“The Lincoln Yards south property remains a huge opportunity, and we are interested in seeing it succeed,” a spokesperson for Sterling Bay said.
A spokesperson for JP Morgan declined to comment.
For Novak, the acquisition is a calculated risk and a major expansion of his development portfolio. The site along the Chicago River is considered a prime, albeit challenging, development opportunity. He has yet to decide what kind of buildings he will ultimately pursue for the site.
The overall Lincoln Yards project has been plagued by a number of issues, including initial political opposition to the massive public subsidies granted for the development, market volatility and a slowdown in commercial real estate demand that has hit large-scale office and retail projects particularly hard. The development was initially pitched as a comprehensive neighborhood with residential, commercial and entertainment components, transforming a former industrial area into a vibrant new section of Chicago.
The latest deal, led by an affiliate of Novak’s firm, signals a renewed attempt to capitalize on the riverfront location and unlock the value of the land.
Novak’s firm was founded in 1980 as a general contractor, which remains its main business. But in the last five years it has accelerated its development efforts, Paschen and Novak said. Its development projects include the Whole Foods on West Belmont and Ashland avenues in Lakeview, as well as a 206-unit multifamily project with a 50,000-square-foot Target store in the Portage Park neighborhood, among other properties.
Novak said the Lincoln Yards deal will mark the biggest amount of land his firm has purchased for development, but it isn’t the largest in terms of the dollar amount of his other projects. He has also developed a $70 million medical office facility for the Rush University health care system at 1630 North Harlem Avenue.
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