Walk into a real estate developer`s office, and likely as not you`ll be shown an album of beautiful buildings.
Walk into a demolition company office, and the chief may pridefully show you pictures of beautiful buildings as well. The difference is, the developer shows you great constructions and the wrecker shows you hit destructions.
Speedway Wrecking Co. president Irving Kolko will enthusiastically display to a visitor a newspaper picture of a handsome old North Lake Shore Drive mansion he tore down in the 1950s. ”Do you remember that one?” he asks fondly.
Kolko`s pride in the giants he has felled is not untypical. The Yellow Pages ad for U.S. Dismantlement Corp. (self-styled ”Surgeons of the Demolition Industry”) includes pictures of soaring structures that have been treated to its surgical skills.
Different as the developer`s and wrecker`s approaches are, their interests coincide when the developer decides the building he`s got has to give way to the building he wants.
Some buildings ripe for demolition are irrecoverable hulks. But for others, doom is pronounced while they are still in use. How does such a building get a date with the wrecker?
Consider: When real estate entrepreneur Harvey Walken bought the property at 1 N. Wacker Drive in 1973, he saw it as a modest, 11-story office building, well located across from the Civic Opera House, that would bring in a steady cash flow. In the mid-1980s, he began to see the property as a hot corner in the newly bustling West Loop that made a prime spot for development. At that point, the 250,000-square-foot, 1911-vintage structure on the land looked obsolete and irrelevant.
Today, even though hot corners everywhere are cooling as a result of the office space glut, the old building is coming down to make way for a planned $700 million, 83-story tower that would be Chicago`s second tallest office building after the Sears Tower.
The fate of the 79-year-old building, which once housed printing presses for the old Herald and Examiner newspaper, is typical of downtown buildings that fall under the shadow of the wrecking ball.
In real estate industry parlance, such buildings no longer constitute the ”highest and best use” for the land they stand on, and the land is said to be ”underimproved.” In more elementary terms, the landowner figures that more money can be made-or less money lost, in some cases-by doing something else with the land.
”It had already been remodeled several times, and it wasn`t really a large building,” said Walken of 1 N. Wacker. ”As buildings get older, you spend more and more money on them, and you don`t want to spend the money if the building can`t compete with other properties over the years.”
One of the financial calculations that doomed the building was the real estate tax, which Walken said tends to be higher per square foot for a small building than a large one in a good downtown location because with a small building the land value weighs more heavily in the tax calculaton.
Other factors, Walken said, were operating costs, which can benefit from economies of scale in a larger building and ”severe” competition from other older Loop buildings.
On the positive side, the location in the center of some of the heaviest office construction activity of the downtown boom seemed to promise eager tenants and high rents.
”If you have an older building in a location that`s not so good, you don`t have the alternatives,” Walken pointed out. ”You can`t wreck it and build a new one even if you want to.”
Whether to remodel or raze and redevelop also involves, like most real estate decisions, the crucial question of timing. Walken himself admits he might have been better off tearing down his old building and starting his new project a year or two ago, though he adds that by the time he finishes his project-he won`t give a timetable-the office market may have rebounded.
Some buildings sentenced to death have gotten reprieves courtesy of the market.
Andy Prodanovic, senior vice president of Real Estate Research Corp., recalls one under-10-story building on a prime North Michigan Avenue location that was bought in the early 1980s by a major developer who intended to demolish it.
”The market changed, and rather than investing the $100 million needed to construct a new building, they opted to renovate the existing one,” he said.
Two years later, Prodanovic pointed out, razing the old building would have made good sense because the market took off again. But that would have meant writing off the renovations, so the building still stands.
Conversely, in extreme cases, the market can doom a building to the real estate world`s Grim Reaper a few years after it has gone up.
”Two or three years ago in Dallas and Houston, when the market bottomed out, owners found they were better off just razing some of the newer buildings,” said Prodanovic. That way, they could at least stop paying taxes and operating expenses on empty buildings, he pointed out.
To hit the market at the right time with developable land, speculators may warehouse buildings that they intend to demolish in the future, maintaining them at a level sufficient to retain current tenants but doing little renovation.
Todd Lillibridge, president of Murdoch, Coll and Lillibridge, a firm that specializes in buying older office buildings for both rehab and redevelopment, said he is assembling a Loop site that he hopes to develop later.
”We have a loft manufacturing building which we`re just running and maintaining,” he said. ”It`s not the highest and best use, but the market conditions dictate a decision not to build today.” He is in the process of buying adjacent property to form a 38,000-square-foot lot to develop on when the market improves.
Lillibridge said he`s never regretted razing a building for development, though he has poured money into rehabbing buildings he later wished he had torn down. ”But don`t get the idea it`s a panacea to knock down a building and hope for a better day,” he cautioned.
The country`s more than 2,500 wreckers (as estimated by the Hillside-based National Association of Demolition Contractors, which doesn`t count little firms that just bash a home now and then) tend to thrive during boom building times like the rest of the real estate industry. Developers in an already built-up area can`t build until the wreckers do their work.
”There was an enormous amount of demolition during the 1980s, bigger and more involved than ever before,” said Sheldon ”Red” Mandell, president of Chicago`s National Wrecking Co., one of the top firms in the business, which claims to do more than 90 percent of Loop demolitions.
A city planning department survey shows that demolition permits were issued for 35 Loop buildings between January of 1988 and June of 1990, 27 of them in the area west of State Street.
Mandell, who follows the real estate market closely, said he expects slower times in wrecking. ”In the demolition business, if the real estate market is bad, our activity will decrease.”
National Wrecking is working on Walken`s 1 N. Wacker building, an approximately $1 million demolition job that is expected to take at least three months.
The key to working in the Loop, Mandell said, is safety. ”You have thousands of people walking on the sidewalk adjacent to the site every day,” he pointed out.
Thus, careful preparations, including constructing a pedestrian walkway and running in special water lines to keep down dust and fight fire if necessary, are essential. Another initial step is to remove asbestos from the buildings, for which National Wrecking has a special in-house team.
Mandell and others say the handling of hazardous materials such as asbestos has become the industry`s biggest concern because of increasingly stringent state and federal health, safety and environmental protection laws. One result has been an increase in training for demolition workers.
”Most demolition companies send their employees for training in environmental hazards,” said William Baker, executive director of the wreckers` trade group.
Another big change in wrecking since World War II has been the use of pneumatic and hydraulic shears, hammers, grapples and other prosthetic monsters that enable a worker to dismantle a building and pulverize the debris from the comfort and safety of his bulldozer.
But for downtown buildings such as 1 N. Wacker, workers also revert to primitive methods, employing picks, sledgehammers and crowbars with a relative degree of precision in order to tear down the exterior walls without burying pedestrians in an avalanche of concrete.
The extra care required for razing downtown buildings deters some of Mandell`s competitors.
”We feel a Loop job requires a lot of intense supervision, more resources than we want to commit to one job,” said Speedway`s Kolko. ”It`s not in our economic interest.”
A project most definitely in Kolko`s interest is the demolition of Comiskey Park, for which he submitted the winning bid of $1,237,000. Work is scheduled to start next March, but could in fact begin earlier, Kolko said.
One of the advantages to Kolko of demolishing Comiskey Park, aside from perhaps gaining a shadowy niche in baseball history, is that the wreckage itself will be an marketable asset-if he maintains the salvage rights he is claiming.
A dispute arose last week between Speedway and White Sox management as to who has rights to exactly what part of the Comiskey`s rubble.
Seats, railings, foul poles, light standards and even bricks will end up in fans` basement rec rooms, offices or back yards, while the steel frame will be sold for scrap.
Kolko last week said he has been negotiating with the Illinois Sports Facilities Authority, which let the contract for the demolition, over who would retain control over certain items. The White Sox have announced that they will sell stadium memorabilia and donate the proceeds to charity.
But Kolko said under his demolition contract, which takes into account the value of wreckage, he ”without question” has salvage rights to the debris. ”We`ll work it out,” Kolko said.
The White Sox already have recognized Kolko`s contribution to their past and future by sending him a bat autographed by players.
In general, the debris from a wrecking job ”belongs to us, for better or for worse,” Kolko said. ”If it`s salvageable, wonderful; if not, we have to get rid of it.”
With the diminishing amount of landfill space a nationwide problem, wreckers are having to truck debris farther and pay more and more for disposal. So marketable wreckage is a prize commodity.
If Kolko, who agrees with others in the business that wrecking may by heading for some lean years, is thinking of branching out into souvenir sales, at least one of his competitors has already embraced diversification.
Mandell, whose company by his estimate has wrecked 150,000 structures
”of every imaginable type and size” in its 47 years, is embarking on building a community of 165 single-family homes on a golf course in Tucson.
The endeavor marks the first homebuilding project for Mandell, who has also owned a bank and rehabbed properties, including a 901-unit apartment building, in Chicago.
”We do a lot of things,” he said, with the air of a man who could build or destroy with equal detachment. ”We`ve lived through 47 years and seen many changes. We`re insulated from any problems and very capable of dealing with them.”
