Glenstar $30M Overhaul Tests Chicago Office Revival

A $30 million renovation now getting underway at the tower at 200 South Wacker Drive will test whether aggressive reinvestment — not just bargain buying — can still unlock value from the general office distress in Downtown Chicago.

Chicago-based Glenstar and Minnesota investor Patrick Halloran this week rolled out plans for a sweeping overhaul of the 41-story, 761,775-square-foot tower overlooking the South Branch of the Chicago River, according to Crain’s. Work is slated to begin this month, roughly a year after the partners bought the building for about $68 million in an all-cash deal.

The project comes as downtown office vacancy hovers near record highs and a wave of troubled buildings trade at steep discounts, the outlet reported. Many new owners have stayed on the sidelines, wary of pouring capital into older towers amid uncertain demand, high construction costs and lingering questions about whether tenants will pay up.

At the tower at 200 South Wacker Drive, Glenstar and Halloran are betting they will. The building is currently 57 percent leased, a figure that includes a pending departure by law firm Goldman Ismail Tomaselli Brennan & Baum, and trails the downtown average of roughly 72 percent. Glenstar managing principal Michael Klein told the outlet that the goal is not just to out-lease competitors, but to do so at higher rents.

Renderings reveal an amenity blitz, with the owners planning to gut and remake the lobby, two mezzanine levels and the lower floors with luxury finishes, a river-facing health club, golf simulators, a parlor gaming area and an outdoor lounge with fire pits that will cantilever over the riverwalk. New pavers aim to enhance the Adams Street entrance, and a 180-seat conference center on the 34th floor will be fully reworked.

Glenstar pegs the core amenity package at about $25 million, with several million more earmarked for restroom and corridor upgrades, back-of-house improvements and roughly 52,000 square feet of spec suites designed for tenants seeking move-in-ready space. Construction is expected to wrap by the end of the year.

The math works in Glenstar and Halloran’s favor, according to the publication, as they paid about $89 per square foot for the building, a fraction of the $282 per square foot the building fetched in 2013.

— Eric Weilbacher