A 47-story North Michigan Avenue high-rise is set to break ground during the pandemic. Sterling Bay CEO says it took a ‘herculean effort.’
Two major Chicago developers are expected to break ground next month on a 47-story apartment and hotel tower on North Michigan Avenue, in what would become the first high-rise to get underway in the city since the coronavirus pandemic shut down much of the economy.
Sterling Bay and Magellan Development Group on Thursday secured $174.5 million in construction financing for the long-planned tower at 300 N. Michigan Ave.
Construction of the $250 million project just south of the Chicago River is set to begin in early August and will take almost two years to complete, Sterling Bay CEO Andy Gloor said.
The project’s financing comes at a time when loans and investors are extremely difficult to line up because of economic concerns stemming from COVID-19.
“It was a herculean effort to get this done,” Gloor said.
No high-rise projects have kicked off in Chicago since the onset of the pandemic, and some that were underway or scheduled to begin have shut down.
A few blocks south of 300 N. Michigan, the fate of a 74-story condo tower designed by Helmut Jahn is in question after economic worries prompted its lender to halt funding after part of the foundation was completed.
The decision to begin a high-rise that includes a hotel comes as business and leisure travel has slowed to a crawl. Many Chicago hotels have closed for extended periods during the pandemic.
Even before the pandemic, Chicago’s hotel market had grown more competitive with a wave of new construction and existing buildings converted to hotels.
Still, Dutch hotel brand citizenM is going forward with its plan to buy the 280-room hotel portion of the building when it is completed. That deal, announced last year, will create citizenM’s first hotel in Chicago, on floors six through 15 of the 523-foot-tall tower.
“Pre-pandemic, hotels on Michigan Avenue were doing well, and it’s a market they want to be in,” Gloor said of citizenM.
The Michigan Avenue tower also will include 289 rental apartments and 25,000 square feet of retail on the lower two floors. No retail leases have been signed.
“Our view of it is that two years from now the world will be dramatically improved from the current condition,” Gloor said. “Right now it’s obviously challenging.”
The tower is designed by bKL Architecture and the general contractor for the project is Linn-Mathes.
The lead lender is Bank OZK, formerly known as Bank of the Ozarks, an active lender for high-rise developments in Chicago and other large cities. There also will be mezzanine debt from Pearlmark Real Estate Partners and Monroe Capital.
Investors include Wanxiang America Real Estate Group, a Chicago-based arm of Chinese auto parts manufacturer Wanxiang Group, and crowdsourced equity raised through CrowdStreet, according to the developers.
“Securing a construction loan of any dollar amount in today’s business climate is a feat, but to secure financing of this magnitude — especially for a property that includes significant involvement of a hotel operator — is almost unheard of,” Pearlmark CEO Stephen Quazzo said in a statement.
Sterling Bay already has demolished a four-story brick building on the site.
The Tribune reported Sterling Bay and Magellan were planning a residential high-rise on the site in 2017. Details of the hotel’s inclusion in the plan emerged last year.
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