Time Equities Lists Historic South Loop Lofts for Conversion

Megadeveloper Time Equities and its partner, Jerry Karlik’s JK Equities, are looking to offload a historic South Loop office building that served as the crucial puzzle piece for its towering 1000M Apartments skyscraper next door.

The New York-based developers in coming days are listing the eight-story loft property at 1006 South Michigan Avenue as a fully entitled office-to-residential conversion prospect. With historic tax credits in hand, the necessary underlying zoning and land use tweaks are secured, as well as floorplan designs already drawn up. Kiser Group’s Andy Friedman, who is marketing the property, summed up the offering as a “development in a box.”

Building permits are also expected to be obtained by the seller ahead of a closing, so a buyer can bypass Chicago’s notorious red tape and start construction almost immediately, the sellers said.

While there’s no official asking price attached to the offering, people familiar with the 80,500-square-foot property said it’s being shopped for around $105 per square foot, which would translate to about $8.5 million. A market source with experience in office-to-residential work confirmed, who’s unconnected to the sellers, that they’re targeting the $100-per-square-foot range, and that construction of the design envisioned by the sellers could cost another $250 to $260 per square foot, or a minimum of about $20 million.

The estimated $2.5 million to $3 million in historic tax credits will help subsidize the heavy lift of the conversion, and the project also qualifies for Chicago’s Affordable Housing Special Assessment Program, providing a reduction from the standard commercial property tax assessment of between 25 percent and 35 percent.

Time Equities and its partners originally acquired the property back in 2015 for just under $11 million when it was 86 percent leased by office tenants. At the time, the site for the developers’ 73-story 1000M luxury apartment tower was effectively landlocked, said Time Equities director of development Robert Singer. Buying 1006 South Michigan unlocked necessary alley access, secured air rights, and allowed the developers to cantilever the skyscraper over the smaller building, optimizing 1000M’s floor plates.

Since that initial acquisition, ownership has managed to recoup a significant portion of its original investment by piecing out components of the property, as office tenants emptied out amid the pandemic. The 1000M development entity paid the 1006 South Michigan entity approximately $3 million for the necessary air rights and excess land, and ownership also sold off a cell tower lease on the roof to a third party.

“I mean, look at the office market here, and in the building,” Singer said. “Not to sugarcoat it, it failed. And so what we’ve been trying to do is figure out what is the right path and how to recoup value.”

Instead of letting the property languish, Time Equities pivoted. The firm worked with the State Historic Preservation Office to design a residential conversion that embraces the building’s historic character, including its unique steel columns clad in white plaster or concrete that mimic the look of classical architecture. The approved plans call for 49 apartments — a mix of one- and two-bedroom units, many with dens — sitting above roughly 4,000 square feet of ground-floor retail.

So why is Time Equities bowing out after doing all the pre-development legwork? According to Singer, the project is a bit too small for the international developer to tackle directly, as it wants to focus on bigger deals. With the 1000M tower complete, and the development team scouring the marketplace for a hefty refinancing package, passing 1006 South Michigan to a local developer who specializes in adaptive reuse is the most efficient path forward.

“Developers love to build. But they don’t love to sit there carrying a building for years, doing design and permitting and wrestling with the historic preservation office and all those other things,” Singer said. “Somebody can step in here literally next month and start construction, and it only takes about a year.”