Pandemic provides Thompson Center snag
State still looking for potential buyer during shaky economic times
Count the state of Illinois’ plan to line up a buyer for the James R. Thompson Center by the end of 2020 as another casualty of the coronavirus pandemic.
A little-noticed provision in legislation the General Assembly passed during its abbreviated, pandemic-focused special session in late May and early June pushed back the timeline for the state to find a buyer for its controversial Loop headquarters bymore than a year.
The state now has until April 5, 2022, to reach an agreement with a buyer for the 1.2 million-squarefoot glass-and-steel structure, though the legislature could grant another extension.
“Although the overall project schedule has been impacted by COVID-19, the Illinois Department of Central Management Services is moving forward with the sale of the James R. Thompson Center,” spokeswoman Marjani Williams said in a statement.
The agency plans to ask for proposals from developers in the first quarter of the new year.
But what kind of responses the state will receive is an open question.
When Gov. J.B. Pritzker signed a bill in April 2019 to authorize the sale of the Helmut Jahn-designed building, Chicago was in the midst of a real estate boom. But COVID-19 has led to a significant slowdown in property sales, and the shaky U.S. economy is making developments difficult to finance.
Chicago- area commercial property sales, including development sites, totaled almost $8.6 billion through October of this year, down 36.8% from the same period last year, according to real estate research firm Real Capital Analytics.
Nationally, commercial sales volume was down 39.7% in the first 10 months of 2020, according to the New York-based firm.
“COVID in and of itself put a freeze on deal activity, even for properties where folks know there’s a market,” said Jim Costello, a senior vice president at Real Capital Analytics. “No one is traveling, which means real estate professionals aren’t getting on planes and looking at properties. Aside from the mechanics of the market, it’s still up in the air how bad this will be. Will the impact last another three years? No one knows the answers to those questions.”
For properties in Cook County, such as the Thompson Center, investors also are concerned about potential increases in property taxes, Costello said.
Those factors could make complex deals such as a Thompson Center redevelopment even more difficult to take on now, he said.
“A complicated project with a lot of challenges, the only way I’m going to do it right now is at a really low price, because I’ve got to put a lot of money into it,” Costello said.
Like the building itself, the proposed sale of the Thompson Center, named after former Gov. James R. “Big Jim” Thompson, who died in August at age 84, has a troubled history.
Former Republican Gov. Bruce Rauner pushed for years to sell the building, and lawmakers even counted on $300 million in revenue from the proposed sale in the final state budget of his single term — a gimmick that was papered over by a surprise tax windfall in April 2019.
After taking office in early 2019, Democratic Gov. J.B. Pritzker pro-
posed using state assets to infuse cash into the state’s severely underfunded pension systems. While the Thompson Center was one obvious candidate, the new governor put together a task force to study other opportunities and make recommendations.
Nearly two years later, with the state facing a nearly $4 billion budget hole this year due to COVID-19 and the failure of Pritzker’s proposed graduated-rate income tax plan, the pension task force has yet to produce any public recommendations.
Pritzker spokeswoman Jordan Abudayyeh declined to comment on when the group will finish its work.
While the Thompson Center has had its share of detractors and fans since opening in 1985, its location in the heart of the city’s central business district could ultimately prove enticing to developers. To the chagrin of preservationists, who consider the building an iconic example of postmod--
ern architecture, state officials have said they have no preference whether new owners tear down the existing structure.
The long-term plan involves relocating the state government’s downtown workforce. The state also has expressed interest in taking a partial ownership stake in either the redeveloped Thompson Center site or what ever new office space is secured for stateworkers, a move that could generate an ongoing revenue stream that could be dedicated to the pension funds.
The state last year selected Ernst & Young Infrastructure Advisors for a three-year, $3.8 million project management contract to oversee the sale process.
The Thompson Center’s prime location comes with some drawbacks and potential obstacles.
The state estimated last year that the building needs $325 million in repairs, and whoever buys the building would have to negotiate with the city and the
CTA over maintaining operation of the Clark/Lake station that occupies part of the building.
While the state has had initial discussions, “ultimately, the purchaser will decide the planned use of the site and enter into an agreement with the city of Chicago and the CTA to maintain the operations of the Clark & Lake station,” Williams said.
City approval also will be needed for any zoning changes a developer might seek for the site.
There’s also a master lease for the retail space in the building’s glass-enclosed atrium and lowerlevel food court that doesn’t expire until 2034. Officials said last year that the state was evaluating its legal options with regard to the master lease, currently held by Boston’s Winthrop Realty Trust and Chicago’s Marc Realty. It’s another issue that may be left up to the buyer to resolve.