Morgan Reed Group’s Chicago Zoning Lawsuit Going to Trial

A long-running legal battle over a historic East Loop office tower is heading to trial.

The dispute revolves around a 2016 zoning change that prohibited the conversion of Chicago’s Pittsfield Building at 55 East Washington Street into a 210-room hotel, Crain’s reported. The outcome of the case could have lasting implications for how zoning laws impact development in Chicago.

Morgan Reed Group, who once owned the 39-story tower, is seeking more than $70 million in damages from the city. The Miami-based developer argued that rezoning the property to restrict hotel use effectively amounted to an illegal taking under the Fifth Amendment. Morgan Reed also claims the rezoning caused the building’s market value to drop significantly.

The developer contends that it had already begun demolition work a year before the zoning change. The rezoning thus prevented the developer from proceeding with its planned hotel.

The city, however, argues that the rezoning did not constitute a total taking of the property and that the building still holds substantial economic value. Chicago’s attorneys maintain that the property can still be developed for other uses, such as luxury apartments, student housing, retail or restaurants.

The city asserts that the building’s value dropped only slightly, with one expert estimating a 10 percent decline. The city also argues that the rezoning was done for the public good, as the building had fallen into disrepair and was seen as a potential safety hazard.

Evidence presented by Morgan Reed’s attorneys suggests that potential buyers showed little interest in the property after the rezoning, despite earlier offers ranging between $72 million and $83.5 million. The developers argue that those deals fell apart due to the rezoning, which made the building less attractive to investors.

The Pittsfield Building, constructed in 1297, rises 38 stories and is a designated Chicago Landmark.

— Andrew Terrell