Venture Signs For Block 37 Office, Residential Rights

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CHICAGO-A joint venture between Chicago-based Golub & Co. and the New York-based BlackRock investment firm has closed on the purchase of land and air rights at 108 N. State St., under development by the troubled Mills Corp., to build a 17-story office building, a 416-unit apartment building and a 381-unit condominium tower. Michael Newman, Golub’s president and chief executive officer, would not divulge the purchase price, but said the complex the company plans to build will cost more than $450 million. Golub will build the residential units on top of the Mills Corp.’s planned retail building on the site, also known as Block 37.

Since its financial troubles became public last year, Mills has encountered the same doubt that’s been attached to the site for years. Developers have tried and failed numerous times to build on the block bounded by State, Randolph, Dearborn and Washington, the vacant site of a former mixed-use development torn down decades ago.

However, Newman told GlobeSt.com that his company is ready to go on the 440,000-sf office building, which is already 80 percent pre-leased to CBS 2 for a broadcast center, and the offices of Morningstar Inc. Newman says he has full confidence that Mills will get its retail portion completed. Mills began construction in July of the 265,000 sf retail portion and a new underground CTA station.

“We’re stepping in on the office portion. It’s our deal, it’s no longer their deal,” Newman says.” I know for a long time there’s been stops and starts at this location, and we’ve all read about Mills’ internal issues. But they’re moving, they’re spending money, they’re under the gun to complete their part of the building as well.” A Mills spokeswoman did not return a call for comment on this topic.

Lee Golub, executive vice president of Golub & Company, handled the transaction for the Golub-BlackRock venture. The office building will rise at 22 West Washington. Golub will work on architecture designs for the residential units, and plans to begin construction, on the roof of the then-completed Mills retail building in 18 months, Newman says.

Newman says he’s very bullish about building on State Street, which has also been going through a transformation. Retail buildings have been torn down nearby to make room for condominiums, though some say that condo demand is slowing in downtown Chicago. However, Newman said Golub’s buildings won’t be trying to compete with the Trump and other high-rise condos going up on Michigan Avenue. “We’re not going to have the tallest buildings, we’re here for the location,” he says. “That area of State is really becoming more of a mixed-use area, with retail having always been there, but hotels and condos moving in, and a great location for the Theater District. Coupled with the theater and local entertainment, it will be a desirable place to work and live.”

The Chicago office of Holiday Fenoglio Fowler represented Mills in the land sale to the Golub-BlackRock venture. The architect for the office building is Perkins & Will. The general contractor is W.E. O’Neil Construction Co. The architect for the residential towers is Solomon Cordwell Buenz.

Mills has made strides to recovery in recent months. A month ago it completed the sale of its interests in its three foreign assets, Vaughan Mills in Ontario, Canada; St. Enoch Centre in Glasgow, Scotland; and Madrid Xanadu in Spain to Ivanhoe Cambridge Inc. for about $988 million, generating proceeds of about $500 million before transaction costs.

Last week it received an offer by Israeli real estate firm Gazit-Globe Ltd. to invest up to $1.2 billion in the firm, which it is considering. In an SEC filing, Gazit-Globe reported it had acquired 9% of Mills’ shares. It does not want Mills to sell all or parts of its remaining assets at what most likely would be distressed prices. Rather it would prefer the company to recapitalize.