An old suburban office building has hit the market and is being branded as a redevelopment opportunity — an increasingly common move in today’s market as Chicagoland’s office sector struggles to rebound.
Chicago-based real estate firm Zeller hired Cushman & Wakefield to sell the 355,000-square-foot Old Orchard Towers at 5202 Old Orchard Road in Skokie, Crain’s reported.
The building is 65 percent leased, and Zeller is actively trying to empty out the building of its 15 tenants before the end of 2024. The seller would gain stronger interest from a buyer looking to repurpose the site in a timely manner if the tenant roster is depleted, so a new owner wouldn’t have to wait out leases to expire before starting redevelopment.
Zeller, led by CEO Bob Six, paid $64 million for the building in 2007 and most recently refinanced it with a $60 million loan in 2018, which is set to mature next month. While there’s no official asking price for the 10-acre site, given the steep decline of office property values citywide, and with limited revenue stemming from the Old Orchard Towers, the property is likely worth far less than its debt balance.
According to marketing materials, the site is best suited for a complete overhaul involving a developer razing the building to make way for apartments or another use. Cushman has proposed a pair of redevelopment options for prospective buyers: One concept that shows a 20-story building with 597 units, and another with two 12- to 14-story buildings totalling 543 units.
“Ownership is working to deliver an unencumbered asset as of the end of 2024 and investors are asked to underwrite accordingly,” a marketing flyer said.
Other nearby landlords are also pivoting to the multifamily realm to breathe new life into their assets. French developer URW is planning a $100 million renovation at the Westfield Old Orchard shopping mall in Skokie that would add about 350 apartments to the area.
Suburban apartment rents rose to a record high last year, making multifamily projects a safer investment than office or retail developments in many eyes.
The Village of Skokie has already voiced its support for 5202 Old Orchard being turned into something else, which is a major hurdle already cleared for a potential buyer. Other Chicago suburbs have opposed large redevelopments of office complexes into residential use, fearing that a huge wave of new residents would overstress schools and public service organizations.
Read more
Development
Chicago
URW aims for $100M repositioning of Skokie mall
Development
Chicago
URW adding 200k SF of healthcare space to Skokie mall redevelopment
Development
Chicago
Chicago’s Gidwitz family to build 500 apartments in Skokie
Skokie Community Development Director Johanna Nyden fully supports the idea, though.
“Redeveloping Old Orchard Towers for residential use complements Westfield’s plans to add thousands of square feet of mixed-use residential and medical office space at nearby Old Orchard shopping center, adding momentum to the exciting economic development occurring in our village,” Nyden told the outlet.
— Quinn Donoghue