Tall & Urban News

A Canadian developer plans two high-rises with more than 1,000 apartments next to Presidential Towers in the West Loop, a big vote of confidence in a downtown multifamily market suffering its worst slump in decades.

Vancouver-based Pacific Reach Properties wants to build the towers, one rising 47 stories and the other 40, just south of the Presidential Towers housing complex and east of the Kennedy Expressway, according to an email downtown Ald. Brendan Reilly, 42nd, sent to constituents on 19 February, 2021.

With 1,053 units, it would be the biggest apartment project in downtown Chicago in at least three decades, if Pacific Reach can pull it off. That may seem like a stretch, given the current state of the downtown market—rents have plunged and the occupancy rate is at its lowest level since at least the 1990s—but Pacific Reach wouldn’t complete construction until the end of 2023 at the earliest, and a recovery could be well along by then. Recent data suggests the market is on the cusp of a turnaround.

“It has bottomed out,” said Dan Dibadj, director of acquisitions at Pacific Reach, which owns an apartment tower in the Loop. “Our leasing activity is picking up and that’s what we’re hearing from our peers as well.”

Pacific Reach plans the two buildings at 601-625 W. Monroe St., a parcel it acquired in 2018 for US$28 million, its first deal in Chicago. It bought the site from a venture led by Chicago developer Steve Fifield, who proposed a 75-story office tower on the site several years ago.

The property is well-situated between the office towers of the central business district and the restaurants, nightlife and other amenities of the Fulton Market District across the highway, said Mark Marshall, senior vice president of development and construction for Pacific Reach.

“We’re really keen and excited about this site,” he said. “It really fills a gap” in the neighborhood.

Founded in 2014, Pacific Reach today owns more than 1,800 apartments, 1.4 million square feet (130,064 square meters) of commercial space and 1,215 hotel rooms in markets including Phoenix, Los Angeles and Toronto, according to its website. In 2018, the developer acquired Linea, the 265-unit building in the Loop, its only other Chicago property. 

Pacific Reach has been in discussions with Reilly about its West Loop plans since 2018 and has made several changes since then, according to Reilly's email. The developer has lowered the height of the taller building, from 54 stories; dropped a plan to include a hotel in the project; added retail space and bike spaces; and lowered the height of the podium at the base of the two high-rises, the alderman wrote.

Designed by Chicago architecture firm Solomon Cordwell Buenz, the two proposed West Loop towers “are linked through their dynamic and opposing arrangement with a shared expression of a vertical element inspired by the Chicago River,” Reilly's email says.

Pacific Reach still has to clear many hurdles before it can begin construction. Because the developer is proposing a bigger project than allowed under current zoning, its proposal needs to the approval of the Chicago Plan Commission and the full City Council, according to Reilly’s email. To secure the zoning it needs, the developer plans to contribute $5.5 million into a city fund to support commercial development on the South and West sides. Pacific Reach also must meet a city requirement that it set aside 10 percent of the apartments as affordable to residents of moderate to lower incomes.

Pacific Reach would also need to secure equity and debt financing to pay for construction, which could cost more than $300 million. The developer would stagger the project, completing the 47-story high-rise on the east end of the site before breaking ground on the other one, Marshall said.

Though 2020 was an awful year for downtown apartment landlords, that hasn’t stopped developers from proposing new residential projects. Late last year, Crescent Heights proposed a 47-story, 413-unit tower at 640 W. Washington Blvd., just a couple of blocks from the Pacific Reach site. Another developer, Interforum Holdings, also unveiled plans last year for two high-rises with 777 apartments and 314 hotel rooms in the South Loop. Interforum recently withdrew that proposal, Reilly said in his email.

Pacific Reach has felt the impact of the slump at Linea, which has had a hard time retaining tenants due to the pandemic. With so few people working from their downtown offices, demand for apartments in the area has plunged. 

Linea “has been hard hit,” Dibadj said. “We lost a lot of tenants.”

But he sees better days ahead, noting that a slowdown in apartment development could work in Pacific Reach’s favor by keeping supply in check a couple of years from now.

“We’re optimistic,” he said.

As Chicago apartment developments go, the Pacific Reach project would be the biggest based on number of units since at least 1989, according to data from Integra Realty Resources, an appraisal and consulting firm. The biggest apartment development to open since then is NEMA Chicago, a skyscraper in the South Loop, with 800 units, followed by Wolf Point East, with 698, according to Integra.

For more on this story, go to Crain's.