Honore Properties Buys Chicao Office Building at Massive Discount

A local real estate investor has purchased a deeply discounted West Loop office building with plans for a residential conversion.

Honore Properties paid $4.8 million in cash for the 72,000-square-foot building at 118 South Clinton Street this week, Crain’s reported. That’s a little under $67 per square foot and a massive discount from the $14 million that the seller, a venture of Maryland-based ASB Real Estate Investments, paid for it in 2019.

Honore, led by founder Michael Shenouda, plans to convert the seven-story building into 70 apartments.

The office-to-resi conversion idea is popular among some developers in places like downtown Chicago, which has a glut of aging office space and high demand for apartments. Mayor Brandon Johnson has plans to rejuvenate an idea by the previous administration to provide $151 million in taxpayer subsidies for residential conversion of office buildings on and near LaSalle Street. It is estimated that could result in 1,000 apartments.

Honore has achieved residential conversions before, although on a smaller scale. The firm converted a small office building at 19 South Wabash Avenue as well as a former Archdiocese of Chicago office building to residences, the outlet reported. The firm has about 700 apartments in its portfolio.

The Clinton Street building is right for conversion because of its central elevators and stairwells and open areas on all sides that let in natural light, Shenouda said.

“Most office buildings are tough to convert. The floor plates are too large, there’s not enough light. But this one kind of lined up for us,” Shenouda told the outlet. “It laid out really well for a residential conversion.”

Honore needs to find a construction loan and estimates the conversion will cost about $10 million, and the firm doesn’t plan to seek any subsidies.

The building is already zoned for residential, and it is largely empty, but the firm needs to clear out its commercial tenants, all of which have small leases set to expire in the next year or two.

—Rachel Stone