Chicago is one of many major U.S. cities trying everything it can to revitalize its downtown business district. The pandemic’s impact on the office market significantly impacted Chicago’s downtown office market. Like many cities, the Windy City is leaning into office conversions, among many other strategies, to overcome the issues of a downtown still recovering from the pandemic’s impact.
The centerpiece of Chicago’s downtown revitalization plans took hold with Mayor Lori Lightfoot’s ambitious plans to repurpose 2.3 million square feet of vacant real estate space in September 2022. However, Lightfoot soon became the first Chicago mayor since 1983 to lose a re-election bid. The future of the so-called LaSalle Street Reimagined initiative has been questioned since Mayor Brandon Johnson took office in May 2023.
Mayor Johnson squashed those doubts earlier this year when he announced his administration would proceed with the LaSalle Street plan, which has an estimated price tag of $1 billion. His administration is working with developers to fine-tune plans to repurpose vacant buildings along and near LaSalle Street, once known as the Wall Street of Chicago. Officials say a full launch announcement of the plans is expected this summer after high interest delayed parts of the project.
Commercial vacancy rates in LaSalle Street, Chicago’s once-bustling central business district, soared to unprecedented levels in the final quarter of 2023. To breathe new life into this area, a high-stakes revitalization program is underway involving several top-tier developers. Mike Reschke, the Chairman and CEO of The Prime Group, leads the charge. Since founding The Prime Group in 1982, Reschke has spearheaded the development of over $11 billion of premier real estate projects nationwide.
Reschke, the son of a union construction worker, has narrowed The Prime Group’s focus onto Chicago development in recent years. It has made him one of the city’s most influential developers. He has also become a close ally of Mayor Johnson. Reschke and the mayor appeared together at an early May groundbreaking of the Thompson Center, a redevelopment of the city’s former administrative location involving The Prime Group. Google announced in 2022 that it intends to purchase Thompson Center in the Loop in one of Chicago’s biggest downtown deals of the decade.
As is often the case with significant Chicago real estate transactions, Reschke’s Prime Group found itself at the heart of the action. Google’s purchase upended Prime Group’s initial plans to acquire the Thompson Center from the state for $70 million, renovate it, and then sell a portion of the offices back to the state. Under this original arrangement, Prime Group intended to market about two-thirds of the property to new office and retail tenants. With Google’s involvement, Prime Group and its partner Quinton Primo will now pay $105 million for the Thompson Center. They plan to renovate the property before selling it to Google.
Google’s announcement of the Thompson Center purchase was an enormous boost for Chicago’s precarious real estate market. The announcement followed the high-profile losses of Boeing, Citadel, and Caterpillar, all of which disclosed plans to move their headquarters out of the city. Renovation of Thompson Center began this year, and Google expects to occupy the massive office property in 2026.
Reschke is involved in many other high-profile projects in Chicago’s core; $ 2 billion worth of his developments are in progress. Prime Group is the developer of two significant redevelopments related to the LaSalle Street conversion plans. Prime Group has partnered with Quinton Primo to convert the former BMO Harris Bank building at 111 West Monroe Street, as well as a five-story block office, to a residential version above the JW Marriot Hotel at 208 South LaSalle.
At 208 LaSalle, Prime Group’s $130 million project aims to create 280 residential units, with 84 designated affordable housing. Prime Group has requested $33 million in tax increment funds to support this development. Meanwhile, at 111 West Monroe, Reschke’s Prime Group and partner Quinton Primo plan to convert the upper floors into a mix of 349 apartments, a club, and a hotel. The residential segment alone will cost $180 million, while the hotel and club will require an additional $115 million. In exchange for creating 105 affordable units, Prime Group and Primo seek $40 million in tax increment funding.
Since 2007, Reschke has converted historic buildings in the LaSalle corridor, including the JW Marriott Chicago and the Residence Inn Chicago/Downtown. The developer is familiar with conversion projects and the risks they entail. In 1999, Crain nicknamed Reschke “Harry Houdini” for his ability to survive thorny financial situations in the city’s real estate market. He made another Houdini-like escape recently when he resolved a $50 million foreclosure lawsuit with lender Midland National Life involving 208 South LaSalle Street.
Reschke purchased the five-story block of offices at 208 South LaSalle for an unknown sum out of receivership terms. The deal settled a foreclosure complaint made by Midland against a separate Reschke venture with a court-approved payout. Midland’s complaint claimed Reschke still owed a balance for the $47.5 million mortgage on the property and that he defaulted on the loan by mixing funds between the office space and a newly opened hotel project called LaSalle.
The deal with Midland resolved a two-year legal tussle between the two parties, giving him the go-ahead to begin the residential conversion at the site. Reschke may need that type of resourcefulness to help turn around LaSalle Street, as the storied financial corridor is doing worse than even the record-high downtown Chicago office vacancy average of more than 20 percent. Despite all these headwinds, Reschke remains bullish on LaSalle Street, which he has called the “best street in America.”
While some have a grim prognosis for Chicago real estate, Reschke and his Prime Group have doubled down. It’s part of the reason he didn’t oppose Mayor Johnson’s controversial real estate transfer tax, which voters rejected in March. In a recent interview, Reschke said he told the mayor to raise the transfer tax. “First off, I’m not a seller. You only pay transfer tax when you sell. I’m in Chicago for life; I’ve been here for life, and I want my kids and my family to be here for life. These are multigenerational investments that I’m doing and setting up,” Reschke said.
Mayor Johnson’s administration has declined to comment on whether all five LaSalle Street Reimagined projects will progress, but an announcement should be coming soon. In the meantime, Reschke’s Prime Group is advancing its two conversion projects. Final drawings for permits are about to start, and the company has adjusted capital requirements to accommodate slightly higher construction costs and higher interest rates.
Much of the success of the LaSalle Street Reimagined initiative, one of the largest in Chicago’s history, will rest on the shoulders of one developer. Luckily, that developer has gained experience through hard-earned lessons to push office conversions through in a city known for its bureaucracy. Prime Group ran into $25 million in cost overruns on his first office-to-hotel conversion when he converted 12 floors of 208 South LaSalle Street into the 610-room JW Marriott. The hotel opened in 2010, and Reschke somehow made it work, even though it was an expensive education. In the most distressing time for Chicago’s office market in history, they’ve turned to a developer famous for conversions. If anyone can help revitalize Chicago’s downtown, it may be the city’s real estate Houdini.
