Quote:
Originally Posted by ardecila
The Pritzker family Crown family owned it, in some capacity. The Merc hadn't owned it since it moved to Wacker in the 1970s.
I don't think it will be a Block 37, though. The problem with Block 37 was the fact that the city kept demanding a complex mixed-use project, but in order to do that, the markets for each component needed to be strong at the same time. We finally got something built, but two major developers had to take a loss, and the mall is still mostly empty. The only reason construction went forward this time is because Mills and then Freed were persuaded that the mall would work economically. Both were wrong, of course.
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There was always far too much government involvement in general in block 37 (real estate development is clearly not a core competency of any government unit), and I agree with you that the edict for a large mixed-use project further set it up for 'challenges'...such projects have a fairly poor overall track record - at least financially speaking - across the U.S. due in part to the complexities in hitting multiple property type market cycles within the same project. However, there is nothing fundamentally 'wrong' with the retail component at block 37 from a market viability perspective....the concept, layout, etc works - provided its filled with wise choices as tenants. The reason the mall is only 40% or whatever leased has little to do, frankly, with market fundamentals - it has virtually everything to do with the project being dramatically undercapitalized, the construction loan presumably being tremendously underwater, seemingly little money either being available, or being made available for necessary tenant improvement work to both land tenants initially and allow them to open once signed on, and.....oh yeah - the project going through the foreclosure process. What caused all this? Certainly the fact that it would appear that far too little equity was contributed to the project (the property was remarkably over-leveraged) certainly didn't help....but also let's not forget that commercial real estate values in general nosedived 30-50% (for development projects, it would probably lean toward the high-end of this range, if not even slightly higher) over the 2008-2009 period. Finally, although this project has faced so many setbacks over the past 20+ years that I've completely lost track, one of the more (granted, in hindsight, which is invariably 20/20), shall we say, boneheaded decisions, was the selection by the city 7 or 8 years ago of Mills Corporation to be the master developer. It was a positively indefensible choice that I believe really hobbled the project in so many ways during the height (2003-2006) of the decade's commercial property boom, which by the end of 2007 or so a fabulous, vibrant, gold-plate tenanted mixed-use office/retail/entertainment/dining residential/hotel/transit could have been successfully delivered to the market...
I take it this should be moved to the block 37 thread...