Chicago developer Warren Baker paid $13 million for a vintage Loop office building, with plans to spend another $6 million sprucing it up and filling its vacant space.
A venture led by Mr. Baker acquired the 23-story building at 105 W. Madison St., which was hit with a foreclosure suit more than two years ago and taken over earlier this year by Extell Development Co., a New York-based developer, according to Cook County property records.
Vintage downtown office buildings have been coveted quarry for developers, who have bought several in the past few years with plans to convert them to apartmentsor hotels. While Mr. Baker isn't ruling out a conversion at 105 W. Madison, he plans to keep it an office building for now. The market for less-expensive downtown office space is especially strong right now because the conversions have removed so much space from the market, he said.
A redevelopment to another use “is an option, but right now what we're seeing is a depleted supply of C Class properties,” said Mr. Baker, president of Chicago-based Baker Development Corp. “You're watching these people get kicked out because their buildings are being converted to hotels or apartments.”
The 126,000-square-foot tower, built in 1928, is about 60 percent leased, he said. The property is mainly occupied by small professional services firms: Its largest tenant is Scott D. Pollock & Associates PC, a law firm that leases 6,800 square feet, according to CoStar Group Inc.
Mr. Baker said he plans to spend about $6 million fixing up the lobby, façade and mechanical systems. Maintenance jobs on the building were deferred while it was in foreclosure.
“We're going to catch up,” he said.
The Baker venture financed the acquisition with an $11 million loan from Republic Bank of Chicago, county records show.
The building's prior owner, a venture led by investor Munir Rafidia, paid $6 million for the property in 2002. The venture took out a $12.5 million loan in 2006 and was hit with a foreclosure suit in 2012. Extell bought the defaulted mortgage last December and took possession of the property through a so-called consent foreclosure in January, county records show.
It's unclear how much Extell paid for the loan, but it likely was much less than outstanding principal balance. An Extell executive did not return a call.
Founded in 1985, Baker Development has acquired or built retail, residential and office properties. Most recently the company proposed tearing down a 30-unit condominium building on the 2500 block of Lincoln Avenue in Lincoln Park and developing a 225-unit apartment building in its place. Though Mr. Baker has presented his plan to two neighborhood groups, Alderman Michele Smith (43rd) has yet to say whether she supports the project.
“We're just waiting for the alderman to signal her position on this,” he said.
Ms. Smith said the Chicago Department of Planning and Development and her office are reviewing Mr. Baker's proposal, which would require a zoning change from the city. Under longstanding Chicago tradition, aldermen generally have the final word on zoning matters in their wards.
Ms. Smith said she had not yet decided whether to approve the project and didn't know when she would.
“There's a lot of work that needs to be done,” she said.