Emboldened by the continued strength of the downtown office market, developer John Buck is planning to build a new skyscraper on Chicago’s premier financial street.
The latest entrant in the city’s office building derby would occupy the southeast corner of South Wacker Drive and Monroe Street, a block south of another Buck project at One North Wacker Drive. And it would be the fourth new skyscraper on Wacker Drive since 1999, including separate projects by Houston developer Hines Interests LP and the billionaire Pritzker family.
The new building would contain 700,000 square feet of office space and would sport a somewhat unusual design: The building would rest on a platform that would be about 120 feet above the ground, sources said. The platform would be supported by powerful columns, with a central shaft containing elevators to shuttle people from the ground floor entrance to the building’s first floor.
This design is intended, sources said, to improve the views from the offices and eliminate the low-rise space, which can be difficult to lease, particularly in a market where there is a shortage of large tenants. The building would be more than 40 stories tall.
John Buck Co. has signed a contract to acquire the 32,500-square-foot site from Toronto-based insurance company Manulife Financial, which acquired the site for development in 1990 only to see the real estate market collapse. It is now a parking lot.
To design the new tower, Buck Co. has hired Chicago-based Lohan Associates, also the architect of One North Wacker, sources said.
The Manulife parcel is across the street from a 1.4-acre site on the northeast corner of Wacker and Monroe, where Chicago-based Prime Group Realty Trust has announced a joint venture with the Pritzkers to build a 60-story skyscraper to be anchored by the family-owned Hyatt Corp.
Buck’s project does not yet have an anchor tenant, one of several obstacles that the developer must overcome before construction can start.
Downtown office vacancy rates are low, despite the building boom. Yet some experts say that leasing activity slowed dramatically during the fourth quarter of 2000, after three very robust quarters. And the current shortage of office space is likely to be eased in two years, when several new buildings are completed.
“I’d be skeptical about another new building, given the way we have seen the market slow down over the last three months,” said Michael Klein, executive managing director in the Chicago office with New York-based real estate firm Insignia/ESG Inc.
“But if anybody can do it, he can,” Klein added. “And he has the smarts to walk away if it can’t be done.”
Buck, the chairman and chief executive of the real estate firm that bears his name, was traveling Wednesday and could not be reached for comment, and company executives would not comment.
An insurance company spokeswoman declined to comment on the negotiations with Buck, in which Manulife was advised by the Chicago office of CB Richard Ellis Inc.
The exact purchase price could not be determined, but Manulife was seeking about $24 million, or $750 per square foot, sources said. Although that would be a strong price in today’s market, it would be only about half the $48.8 million, or $1,499 per square foot, that Manulife paid for the land, a transaction that signaled that downtown land values had reached an apex.
Sources said Buck Co. is still conducting its due diligence research on the acquisition, and has time to test the market before making a final commitment.
Buck has defied the conventional wisdom before and won, most recently with One North Wacker, a joint venture with New York investment firm Lend Lease Real Estate Investments Inc.
Construction of that project, Chicago’s first multi-tenant skyscraper since the collapse of the real estate market, was begun without an anchor tenant and is now nearly fully leased, nine months before completion.
The new Buck project would be about two-thirds the size of One North Wacker, reducing the riskiness of the development.
And while looking for tenants, Buck Co. is also arranging construction financing for the new project, which could cost an estimated $190 million to complete. Buck’s project does not yet have an anchor tenant, an obstacle that he must overcome before construction can start.
