Lender Lists Chicago Asset as Office-to-Resi Deal Breaks Down

A distressed office tower in downtown Chicago is up for sale, derailing ambitious plans by two developers to convert the building into apartments.

Plans to convert a portion of the Clark Adams Building at 105 West Adams Street into nearly 250 residential units hangs in the balance as the owner seeks to find a buyer for the property, Crian’s reported.

Old National Bank, which took ownership of the top 30 floors of the 41-story office tower, has enlisted Millennium Properties R/E to find a buyer for the space. The bank acquired the property earlier this year by winning a judgment of foreclosure and submitting the highest bid in a sheriff’s sale. The building’s lower floors, which are used as a Club Quarters hotel, are owned separately.

The building was previously owned by a venture led by Chicago investor Musa Tadros, who defaulted on a $29 million loan used to refinance it in 2016.

The proposed redevelopment was part of the LaSalle Street Reimagined program, an initiative by the city of Chicago to revitalize downtown by converting outdated office buildings into residential spaces.

The program, launched under former Mayor Lori Lightfoot, offers tax incentives to developers who commit to converting buildings into apartments, with at least 30 percent of the units dedicated to affordable housing.

Developers Celadon Partners and Blackwood Group had worked on a proposal to acquire the building and convert it into 247 apartments, including 185 affordable units. Their project was one of five shortlisted last year by city officials for potential subsidies under the LaSalle Street initiative. However, the project did not advance to final approval under Mayor Brandon Johnson’s administration.

The sale of the building has been complicated by other investors who claim ownership stakes in the property, Celadon CEO Scott Henry told the outlet.

The estimated cost of redeveloping the building has also increased, now approaching $210 million due to higher construction costs and interest rates. The developers had originally requested $60 million in tax increment financing from the city, but the escalating costs have put their plans at risk.

Old National is reportedly seeking about $10 million for the property, a significant reduction from its previous value.

— Andrew Terrell