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CHICAGO-Block 37 is nearing a deal for a 380-room Loews Hotel to be built atop the four-story, 280,000-sf retail component of the mixed-use Central Loop Development being developed by Joseph Freed and Associates. The reportedly $175 million hotel would be built in 22 floors above the retail. The first Chicago location of the international luxury hotel chain has been in discussions for some time, but became a near-certainty last week with the approval of a $12 million subsidy for the project by the Chicago Community Development Commission.

If approved by the Chicago City Council, where the request goes next for a vote, the TIF subsidy would repay the developer for a funding shortfall on a Chicago Transit Authority station being constructed under Block 37, says Paul Fitzpatrick, SVP of development for Freed. A provision of the subsidy mandates that the company sell rights for the hotel portion of its development to Loews, reportedly for $1. “It’s not a done deal, but hopefully very soon it will be,” Fitzpatrick tells GlobeSt.com. “We obviously continue to work with the city of Chicago as well as Loews to finalize that deal.”

As for the retail component, leasing remains strong, Fitzpatrick says, with three new leases representing a total of 26,130 sf announced this week. Spanish fashion retailer Zara will move into its first Chicago location, with 15,030 sf on the first and second floors of the development along Randolph Street. German athletic wear company PUMA will occupy 8,000 sf on two floors at the corner of State and Randolph streets in the development. Fashion lifestyle brand Ben Sherman, based in London, will open its first Chicago store in 3,100 sf along State Street.

These most recent leases bring the development to about 60% preleased thus far, with another 20% of the space in final lease negotiations, according to Fitzpatrick. Asking lease rates in the development range from around $30 to “the high-$100s,” Fitzpatrick says. Other tenants confirmed for the development include David Barton Gym, Muvico, a new concept restaurant by Lettuce Entertain You, Au Bon Pain, Rosa Mexicano, Auntie Anne’s, Beard Papa’s, Gateway News, Freshii, Godiva, Sabon, Steve Madden and Lululemon. The space is expected to deliver next year, with a grand opening in summer 2009, says Fitzpatrick.

“The area has good demographics, much more diverse than a lot of other areas in the Loop,” Fitzpatrick says. “You have the daytime office population, you have the overwhelming tourist population, and the student population. The demographic is really driving the success of leasing at Block 37.”

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