Oct
13

Land Behind Wrigley Building Could Fetch More Than $40 Million

October 13, 2014
The Lakeshore Athletic Club, 441 N. Wabash, closed in 2007 after its lease expired. Photo from CoStar Group Inc.

The Lakeshore Athletic Club, 441 N. Wabash, closed in 2007 after its lease expired. Photo from CoStar Group Inc.

Owners of the shuttered Lakeshore Athletic Club building are looking to sell the prime development site, which could fetch in excess of $40 million — far more than it cost three years ago to buy both the 1.5-acre site and the historic Wrigley Building just to its east.

The Chicago office of HFF Inc. has been hired to broker a seek of the site at 441 N. Wabash Ave., just west of North Michigan Avenue shopping and just east of River North nightlife, according to real estate sources.

Real estate experts estimate the site could sell for far more than the $33 million the venture paid in 2011 to Wm. Wrigley Jr. Co. for the 472,639-square-foot Wrigley Building and the land, when real estate values were lower amid a prolonged recession. The land alone may now be worth more than $40 million, people familiar with the site estimate.

“Even when they made the purchase, I thought the land was worth more than they paid for the building itself — and that was not the greatest of times,” said Mike Nardini, a first vice president at Los Angeles-based CBRE Inc., who is not involved with the property. “It certainly is worth more than ($33 million) now.

“It was a fantastic buy. It’s one of my favorite sites. They hit it really big.”

A spokeswoman for the ownership group declined to comment, and HFF Director Daniel Kaufman did not return calls.

WRIGLEY BUILDING INVESTMENTS

Beyond the acquisition cost, the owners have invested heavily to redevelop the Wrigley Building, which was about two-thirds vacant when the namesake seller moved out in 2012. After gutting the interior, the owners have signed a number of mostly smaller office tenants as well as creating new street-level retail, which includes a Walgreen Co. flagship store and a Peet’s Coffee & Tea shop.

Exploring a sale comes after the site’s ownership group — a Chicago-based venture including BDT Capital Partners LLC, Zeller Realty Group and Groupon Inc. co-founders Eric Lefkofsky and Brad Keywell — last month confirmed plans to demolish the six-story gym at Hubbard Street and Wabash Avenue. The gym closed in 2009.

At the time, a spokeswoman for the owners said the site would be used as a parking lot that would open in December, but did not comment on longer-term plans for the site. Besides clearing the way for a sale and future development, demolition of the shuttered gym would lower property tax bills in the meantime.

‘REALLY VALUABLE’

The site is hindered by being just west of the Magnificent Mile, but developers could build retail on a pad accessible from that upper street level, while adding a residential or hotel tower on the remainder of the land, people familiar with the site said. Timing is in the seller’s favor, amid continually rising values and strong development activity in River North and on Michigan Avenue.

“You can believe the land is up there at $40 million for a full block with a couple of street levels,” Mr. Nardini said. “It’s really valuable right now if they want to move it.”

The owners are poised for a large, shorter-term payout in a land sale after BDT first talked with the National Association of Realtors about forming a joint venture for a major redevelopment that likely would have included the Lakeshore Athletic Club land. In the mixed-use plan, the organization’s headquarters just north of the Wrigley Building and the gym would have been razed.

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