"Right now the question is, can the developer get the the deal signed that confirms pursuit of financing and pursuit of the leases?" Christoper Hill, former city of Chicago planning and development commissioner, tells GlobeSt.com. Hill, now senior vice president for Grubb & Ellis, adds that question mark could be erased Thursday by a favorable Plan Commission recommendation, and ultimately, a green light from the City Council. "That's the kind of definitive approval the city can give to get financing."

However, capital availability may become the new hurdle. The financial climate is not as good as it was a year ago, concedes Brent Minor, a vice president for LaSalle Bank as well as chairman of the State Street Commission and vice chairman of the Greater State Street Council. "I'm a banker and I'm a realist," Minor said. "But I don't believe (developer JMB Realty Corp.) will have difficulty with financing. Am I concerned? Yes. However, I believe the project will be easier to finance with the product we now have today."

Previous drawings for the residential, retail and hotel project have been widely criticized for being outdated and too suburban, prompting the hiring of a new architectural firm. The Solomon Cordwell Buenz design appears to have won support from city officials and developers involved, particularly for its underground "pedway" and easier access to a rooftop park that includes a restaurant. The pedway would include access to two Chicago Transit Authority subway lines.

Besides having a Lord & Taylor store anchoring the retail component, Minor says JMB has indicated it has "two or three" retailers in each of the remaining storefronts. Marriott would build a 12-story hotel, fronting on Dearborn Street, with access to the 1-acre rooftop park. MCZ Development would build the 66-story condominium building. If city approval is forthcoming, ground could be broken as early as this summer, with completion in 2003. The condominiums would be the last element to be built, and could be pre-sold beginning this fall, Minor says.

Downtown has been a boom town for condominium conversions, but that could be changing, says Christy Lockridge, director for Heller Financial, Inc. "I would argue the condo market is getting a little tougher. We're seeing a lot more need for mezzanine financing," Lockridge said. "There's a perception in the market that it's slowing down."

Likewise, the developers may discover, if they haven't already, that they need a greater equity position in the hotel portion of the project.

"Typically, hotels are considered to be a risky investment," saiys Ted Mandigo of Elmhurst, IL-based TR Mandigo Co. He pointed to Marriott's Longwharf property in Boston of the Atlantic Ocean, which lenders still considered a "C" property at the time. "Hotels tend to be extremely good producers on the upside of the economic cycle but as you get on the downside of the cycle, they leverage the other way."However, Mandigo was impressed with the plans, which would bring pedestrian traffic through the hotel. "Retail is very attractive to visitors and guests," Mandigo says.

The consensus is that all three elements would have to move forward for the project to succeed. Although different developers are involved in the various components, they would share common elements in the mixed-used project. However, Hill said "because the residential is physically on top of everything else, it can't be built or occupied" until the retail and hotel pieces of the puzzle are in place.

A Commonwealth Edison substation is all that's left of the State Street block bought by the city and razed for development, which was stalled by the early 1990s recession.

The Solomon Cordwell Buenz's portfolio includes the Sheraton Chicago Hotel and Towers, Crate & Barrel's flagship store on Michigan Avenue and luxury Bristol Condominiums in the Gold Coast area here.

Instant Insights /

Nailing Down Financing May Be Last Hurdle for Block 37

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