Land Sale Paves Way for $2.5B Lakeshore East

Work on infrastructure improvements are scheduled to begin in September on land that now is used as a nine-hole golf course, driving range and sports field. In addition to condominiums and townhouses, the project also includes a six-acre park, a result of down-zoning of the development by the city to make the Illinois Center area less dense. First occupancy of the condominiums and park homes is expected in the second quarter of 2004.

Rather than 14.5 million sf allowed under previous zoning, Lakeshore East's project will add 9.7 million sf, Near North Properties president James R. Loewenberg tells GlobeSt.com.

"The city has been wonderful," says Loewenberg, admitting those aren't words often heard from developers trying to get their projects built. City planners has asked for copious details of the project down to light fixtures and tree sizes, Loewenberg explains, and the developers don't mind the meticulous attention the project is getting.

"The city knows exactly what we're doing here," Loewenberg says.

The zoning for the project also is flexible, he adds, allowing the developers to switch uses if market conditions change. That already has been taken into account, as one of the previous owners of the land was involved in developing Illinois Center's more than 3 million sf of office space. Lakeshore East has paid $81 million for 83 acres to a joint venture that includes Metropolitan Structures, Pepsi American and Metropolitan Life Insurance.

"We believe the character of the whole neighborhood has changed," Loewenberg says. Realistically, it's not an office building environment anymore."

While newcomers such as Jackson, MS-based Parkway Properties have bought into Illinois Center, the hotter submarket has been the West Loop, where proximity to commuter rail stations attracts tenants and their employees.

Lakeshore East could add a third hotel to an East Wacker Drive stretch that includes a Hyatt Regency and Swisshotel, but that likely won't happen until late in the development process, Loewenberg says. "It would be very tough to do a hotel deal today," he notes. "In the next five to 10 years, though, who knows?"

While concessions are prevalent in the multifamily rental market, Loewenberg is optimistic about the for-sale first phase of the development. "The next few years look pretty good for that kind of product," he tells GlobeSt.com.