Welcome to the inaugural Chicago Weekend Tour, where The Real Deal will review the biggest local real estate headlines of the week.
Data center demand is becoming a soft landing for developers eyeing big projects that may not work out in other sectors in Chicago.
At least two more developers were reported this week to be falling back on data center tenants after running into obstacles with their respective mixed-use housing and office plans: longtime commercial development executive Anthony Iatarola and prolific trophy office investment firm 601W Companies.
Iatarola’s firm 5a7 sold more than 180 acres in suburban Hoffman Estates that it had long planned on developing into more than 1,000 homes alongside 200,000 square feet of commercial space for $45 million to Florida-based data center player Karis Critical. The deal puts the so-called Plum Farms housing and retail plan to rest after it encountered a legal challenge (which the development overcame), as well as uncertainty over an infrastructure cost-sharing agreement with the village.
Meanwhile, Karis aims to prep the site for data center development. Across the street, Compass Datacenters is advancing its conversion of the former Sears office complex into another huge computing campus.
In downtown Chicago, 601W was reported to be running into trouble with its renovation of 801 South Canal Street, the empty, 683,000-square-foot former Northern Trust office building.
With a $265 million plan to rejuvenate the project and bring office tenants back, the landlord took out $215 million in debt. But the cost of the buildout became a problem for construction consulting firm R.M. Chin & Associates, which leased more than 15,000 square feet and was set to be its first tenant until reportedly backing away from the deal.
The landlord reportedly needs another debt package to pay off its current loan before proceeding, and is now considering a pivot to make at least some of the building — you guessed it — a data center.
There was more trouble involving yet another blue chip investor. A Blackstone venture was hit with a $310 million foreclosure lawsuit for the 24-story office tower known as River North Point at 350 North Orleans Street. The litigation marked the latest step in a long-running conundrum at the building. Blackstone has poured tens of millions of dollars into the property during its ownership but wrote its investment down to zero as it’s now expected the property will fetch far less than the balance of the loan once it’s sold, either through foreclosure or on the open market.
Finally, TRD put together an analysis featuring commentary from experts on Loop development and federal office leasing showing the roadblocks in front of President Trump and Elon Musk in their quest to sell off government-owned buildings and slash federal office leases.
Next week, we’ll have another tour of Chicago’s real estate news.
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Sears headquarters sold to Compass Datacenters for $194M