CHICAGO | 108 North State (Block 37)

[spyguy]

Signs are up for Eileen Fisher on the first floor facing State. More importantly, the Block 37 site lists job openings for Lettuce's "The Block" food court - hopefully this means the issues between the banks and LEYE/Freed have been resolved and that it will open soon.

http://www.chicagorealestatedaily.co...#axzz1DQW6wf15

Another blizzard casualty: the Block 37 mall auction
By: Eddie Baeb February 09, 2011

Even Mother Nature is getting into the act at Block 37.

The blizzard that paralyzed Chicago last week also postponed the court-ordered sheriff's auction of the new mall at Block 37. The auction, which would be the largest foreclosure sale of a downtown property in more than a decade, was set for Feb. 2 after a group of lenders led by Bank of America Corp. obtained a foreclosure judgment in December against the four-level mall at 108 N. State St.

[Nowhereman1280]

^^^ Idiots should have let Freed try and finish the project and he probably could have refinanced with them on a long term loan at a much higher value than $85 million. I don't know what these morons were thinking... This is such a buyers market on commercial debt that they were guaranteed to be robbed blind if they foreclosed. Why they didn't just play ball and work out a deal with Freed I don't know... They must have been afraid he would default on other projects and that those lenders might come after his other assets...

[spyguy]

http://www.filmjournal.com/filmjourn...c8e5e00b6aff07

Premier entertainment: Paragon packages pictures and amenities at more popular prices
By Andreas Fuchs Feb 18, 2011

...With Paragon operating two upscale locations in Fredericksburg, Virginia, and Coconut Grove, Florida, and a third one at Block 37 in downtown Chicago waiting in the wings, this statement may seem contradictory in light of “the most differentiating moviegoing and entertainment experience” that their theatres promise. But it’s not, Whalen contends. “You have to create the right price point and amenity package to make it affordable for people to keep coming back regularly.”

...In addition to Fredericksburg and CocoWalk, that includes Block 37 in downtown Chicago, “which may or may not happen,” Whalen cautions due to pending foreclosure proceedings on the development. Decided upon is a deal for two sites currently operated by CineMagic Theatres. “We are in the process of taking over two theatres in Minnesota,” Whalen shares with FJI. In addition to the Chateau 14 in Rochester, “Paragon will be doing a ‘premier’ balcony concept at the Atlantis 15 in Burnsville, which will be similar to our Backlot at Paragon Grove.”


JPRA Architects/ Facebook

JPRA Architects/ Facebook

A good article in Crain's today showing that the retail vacancy rate in and around the Loop is at its lowest point in several years. It also mentions that Target is looking at other sites downtown for more CityTargets. My guess is they'll target River North/Streeterville, possibly North/Clybourn.

“Today, the availability of street-front space on State Street is essentially zero,” says Mr. Vance.

That's a point I've been trying to make for a while now, especially when these doom and gloom articles popup about how State Street is supposedly struggling or becoming cheaper.

[spyguy]

New York's Magnolia Bakery (the ones credited with creating the cupcake fad) is looking to open on the street level right next to Sephora. While I'm not a fan of these cupcake places, Magnolia's stores are usually open pretty late which can only be a good thing for State Street.

Also, the Comic Vault store on the third floor announced that they're opening April 1 (no joke).

[SamInTheLoop]

The Tribune reported today that Magnolia did indeed sign its lease......good news........to tell you the truth their cupcakes are so-so....had a couple at one of their NY stores several years ago......neither they nor most of the other trendy specialty cupcake bakeries can quite frankly match the basic cupcakes Whole Foods sells though....anyway, more space spoken for, although as always painfully slowly, is a great thing...

[SamInTheLoop]

So the auction sale should be right around the corner, right? Does anyone know the date? This week? I can't wait until the project is in new hands, at a much lower cost, so progress can really get moving.....I do hope its a very competent outfit that puts in the winning bid though........with the sordid history of this development, absolutely anything and everything is possible and in fact probable, so nothing is going to surprise me - not if the buyer turns out to be the dude from Europe who bought the old Post Office, nor Donald Trump, nor Garrett Kelleher, nor Garrison Keillor nor Lady Gaga........I've made up my mind from this point on I am absolutely expecting the bizarre and extreme disappointment with Block 37!

[lawfin]

Originally Posted by spyguy

New York's Magnolia Bakery (the ones credited with creating the cupcake fad) is looking to open on the street level right next to Sephora. While I'm not a fan of these cupcake places, Magnolia's stores are usually open pretty late which can only be a good thing for State Street.

Also, the Comic Vault store on the third floor announced that they're opening April 1 (no joke).

for local cupcakes flourish bakery on Bryn mawr is quite good

[spyguy]

Originally Posted by SamInTheLoop

So the auction sale should be right around the corner, right? Does anyone know the date? This week? I can't wait until the project is in new hands, at a much lower cost, so progress can really get moving.....I do hope its a very competent outfit that puts in the winning bid though........with the sordid history of this development, absolutely anything and everything is possible and in fact probable, so nothing is going to surprise me - not if the buyer turns out to be the dude from Europe who bought the old Post Office, nor Donald Trump, nor Garrett Kelleher, nor Garrison Keillor nor Lady Gaga........I've made up my mind from this point on I am absolutely expecting the bizarre and extreme disappointment with Block 37!

Hopefully the new owner does what is necessary in order to make this a successful project. That includes not just signing leases but being somewhat selective about the tenants, making interior changes like adding comfortable seating areas (I'd like to see exterior changes as well but that may no longer be feasible), and starting an actual marketing campaign across multiple platforms.

The other portion that I keep thinking about is the hotel and residential tower. With the hotel and rental markets improving it would be great to see that phase move forward relatively soon. For example, Virgin Hotels is scouting properties downtown. In the future maybe Virgin could provide seamless service between O'Hare (Virgin Atlantic) and a Virgin Hotel atop the B37 superstation. And somewhat related, Crain's mentioned today that the owners of the Oriental Theatre office building are looking for a buyer who could convert the building into a hotel or housing.

[SamInTheLoop]

^ Definitely - I've been thinking of the next phases of the project as well........actually I've been alternately up and down on this project for the last couple years (it's difficult not to be taken for an emotional roller coaster ride on this one, right?) However, being in a positive mood today, the timing couldn't be better for someone to come in at a much lower cost base, and get the retail portion leased-up this year, and follow early-to-mid-next year with launching construction on apartment and hotel tower(s). As a developer, you want to time the cycle right by launching your projects near the beginning of the upcycle, and optimal timing is definitely approaching for these two property types within the next 3-6 quarters I would say. For the retail component, a new owner will undoubtedly be able to offer lower rents and also financial stability of ownership, which figures to help greatly in landing a really strong line-up and mix of tenants. It is also interesting that Crain's is breaking this week that Roosevelt Collection is under contract to be sold for roughly half its total construction cost. It will be interesting to see how the price agreed to this week by its new owner will compare. There are of course similarities - largely unoccupied retail property with significant development rights. If anything I'd think Block 37 could do a bit better - perhaps sell for two-thirds or so of its all-in cost, but that's a complete guess really. It will be interesting to see how the auction goes this week.

Is John Buck putting in a bid? That might be a good situation to see Buck win it, as they do have successful experience in retail, apartment, and hotel development, ownership, management, etc. They might really be able to turn the project around.

Does anyone know if the Lettuce Entertain You project at Block 37 has resumed active build-out? I think Spyguy previously mentioned a hopeful sign in an employment posting.....

[headcase]

Producer eyes Block 37 for interactive show 'We Gotta Bingo'

Trib link

The much-troubled new Block 37 development in Chicago's Loop perhaps is going to have a live show after all: An interactive dinner-theater experience called "We Gotta Bingo."

... the show might reasonably be described as akin to "Tony 'N' Tina's Wedding," but with live bingo games and beer. The two-hour attraction involves watching a competition between two rival Catholic parishes, struggling for power in the church hierarchy. Audiences get to compete for prizes in the bingo-fueled tussle, eat hors d'oeuvres and a "home-made" lasagna dinner, drink beverages at the old-woodsy "Der Brew-Ha-Ha," and dance to a live polka band.

...

In an interview Monday, Collins said he has identified, and found investors to allow him to lease, a 6,000-square-foot space on the third floor of the retail and entertainment development at State and Randolph Streets.

...

...Collins said he still expects to open this fall, with long-running jobs for 13 Chicago actors, 3 musicians and support staff.

SSDD

[rascacielos]

http://chicagobreakingbusiness.com/2...f-america.html

[Standpoor]

Originally Posted by rascacielos

http://chicagobreakingbusiness.com/2...f-america.html

No comments on this absurd tale yet. Bank of America foreclosed, couldn't find a buyer for the $180 million dollar loan. Rumors that the bankruptcy bidding was going to start at $220 million and Bank of America is the one ending up buying it for $100 million dollars. Seriously this tale is a joke. Old Navy goes for $23 million dollars but Block 37 only sells for $100 million. That is $351 per square foot for Block 37 compared to $511 per square foot for Old Navy.

Call me crazy but I like the place. It is not particularly pleasant on Dearborn but the rest of it is ok and the inside once it is filled will be the best thing on State St. I know that is a low bar but still. I am also glad that the super station shell is there. I do not know what purpose it will ever serve but it is nice to have the option. Again, call me crazy

[i_am_hydrogen]

Originally Posted by Standpoor

I am also glad that the super station shell is there. I do not know what purpose it will ever serve but it is nice to have the option. Again, call me crazy

Don't abandon all hope. Daley is still actively seeking foreign investors to complete the project.

http://newsblogs.chicagotribune.com/...eed-train.html

[wrab]

Originally Posted by i_am_hydrogen

Don't abandon all hope. Daley is still actively seeking foreign investors to complete the project.

http://newsblogs.chicagotribune.com/...eed-train.html

Maybe some Chinese investment will result from Daley's recent charm offensive with Hu?

[SamInTheLoop]

Ok, so somebody is going to have to help me understand the dynamics of the bidding on this thing. Nobody else put in a bid? Nobody? Is risk aversion for opportunistic investment-style retail at this location so severe that no investor lobbed in a bid for no more than (I'm guesstimating) 40% or so of construction cost? Huh? Or has the 'curse' of the block actually scared off otherwise rational, calculating investors from capturing the potential here at an undeniably low cost base....so much upside, not even including the rights to build the residential/hotel tower(s)......it's perplexing to say the least...

[Nowhereman1280]

^^^ Foreclosures are complex animals, I've worked in the business for years and I still don't even fully understand all of their complexities, but what happened here was a Judicial Sale which is essentially an auction which usually starts at the value of the debt on the property. After a lender wins a foreclosure case the court then carries out a sale where all the proceeds are then distributed to the lender or lenders.

They do it at auction in order to preserve any equity that the owner may have in the property. So if you get foreclosed on and your property is worth $1,000,000 and you have $800,000 in debt on it, and it sells at auction for $900,000 then you recover the $100,000. This usually doesn't happen because people usually don't get foreclosed on unless they are heavily underwater and unable to sell the property in the first place. This has especially been the case since the market tanked as a huge number of homes are underwater. However, the courts must do it this way in order to be fair and equitable.

When there are two lenders they are allowed to bid against each other up to the cost of their debt against the property which helps in determining the fair allocation of proceeds to lenders (i.e. the second lender almost always gets wiped out if there is no other bidder).

If no one bids it usually is an indication that the property is worth far less than the debt and the deed then reverts to the bank who is then able to sell it for a loss. That is what happened here. Yes the entire property cost more than $180,000,000, but this isn't for the entire property, only for the mall, and the value of this property is probably well below its replacement cost (i.e. cost to build) and wouldn't be constructed in a market like this in the first place so cost to build is irrelevant.

[SamInTheLoop]

That makes sense - there's no doubt most would currently value it at far less than the outstanding debt.

As for replacement cost - many large investors do look at the metric as one of many considerations, but of course it's usually for properties that are much more stabilized than the retail at Block 37.

The loan that Freed took out was widely reported as $205 million. As this was the height of the boom, lending standards were loose and LTVs high.....if we assumed an 80% LTV, that would put the project cost at something like $256 million.

Incidentally, the loan for the Golub office tower was reported to be $115 million, with a similar LTV that would bring the total office plus retail portion construction cost at around $400 million.......I'm not sure where the underground CTA related-stuff figures in, but if that's not included, I'm sure that brings the total construction cost so far on the project to $550 million+, and with hopefully eventual residential and hotel towers, maybe $750 million+...

[Nowhereman1280]

Originally Posted by SamInTheLoop

As for replacement cost - many large investors do look at the metric as one of many considerations, but of course it's usually for properties that are much more stabilized than the retail at Block 37.

Well not this market. Replacement cost in such terrible conditions is used for only one thing: insurance. It might be a thought in the back of the minds of investors looking for a deal ("oh hey, not only does the math work, but this cost 4 times more to build"), but nothing more right now.

[Vlajos]

Originally Posted by lawfin

for local cupcakes flourish bakery on Bryn mawr is quite good

Their breads are amazing as well.

[djlx2v2]

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