The purchase price was not immediately available, but a source familiar with the terms of the deal said the Reschke venture that bought the property paid less than the $47.5 million balance on the mortgage at issue in the foreclosure suit. That means Reschke and Midland effectively settled their nearly two-year dispute with a court-approved payment sufficient to retire the Midland loan and still allow Reschke to retain the property.
The deal clears the way for Reschke to pursue a $130 million plan to turn the nearly 222,000-square-foot block into 280 apartments, including 84 affordable units. Reschke is vying for $33 million in tax-increment financing money from city taxpayers to help with the project, which came in response to Mayor Lori Lightfoot’s LaSalle Street Reimagined initiative dangling public subsidies for office-to-apartment redevelopment in the corridor.
The foreclosure decision is also classic Reschke, who has been known throughout his nearly 40-year career in Chicago real estate for finding creative ways out of tight spots with financial partners. Crain’s described him in a 1999 profile as the “Harry Houdini of the Chicago real estate circus” for his ability to escape financial distress and hang on to his properties, a trick he has repeated several times since then.
Keeping his plan for 208 S. LaSalle alive is also part of a broader, highly ambitious bet Reschke is making on the vacant LaSalle Street space and the central loop that is rebounding from the COVID-19 pandemic. The developer, who already owns a landmark building on LaSalle that he converted into a Residence Inn, is now partnering with Google to overhaul the dilapidated James R. Thompson Center into a modern office building. He is also renovating an office building at 115 S. LaSalle St. to become the state of Illinois’ new Chicago office, and laying out a nearly $300 million plan to convert former BMO Harris Bank office buildings at 111 W. Monroe St. into a combination of apartments and a separate club and hotel.
Reschke declined to share the terms of his deal to repurchase the 208 S. LaSalle offices. “I guess a good resolution is where everyone thought they gave too much and both (parties) are happy or both are a little upset,” he said. – But it was a fair and just solution, and that is why we agreed.
A spokesman for Midland did not respond to a request for comment.
Midland began the legal battle in March 2021 when it alleged in the foreclosure complaint that Reschke defaulted on his loan by commingling funds between the office property and a hotel Reschke was developing on the floors above, among other allegations.
Reschke vehemently denied the allegations, countering that Midland had illegally collected income from the office property to make it appear that Reschke’s venture had defaulted on the loan and to effectively build up a deposit in case Reschke’s venture walked away from the property . .
Later that year, a Cook County judge appointed Millennium Properties’ Dan Hyman as receiver to oversee the property while the lawsuit was pending. So last year, both parties and the court approved a measure allowing Hyman to market the property for sale in an attempt to resolve the case. Several investors are said to have bid on the office block, but Reschke emerged as the winning bidder during a sale approved by a Cook County judge in January, records show.
As of June, the offices were 49% leased, according to a marketing flyer from Millennium Properties. The property includes control of 9,500 square meters of ground floor retail space occupied by 7-Eleven and menswear store Charles Tyrwhitt.
Reschke’s Prime Group first bought the 208 S. LaSalle offices in 2005, when it paid $44 million for the entire Daniel Burnham-designed building and went on to spend close to $400 million renovating it and converting the first 12 floors to JW Marriott with 610 rooms. , which opened in 2010. Another Reschke venture converted five floors above the office apartment into a 232-room luxury hotel called the LaSalle Hotel that opened last summer.
Reschke released more details last week about his plan to convert the 208 S. LaSalle offices into apartments. In addition to the TIF financing he is seeking from the city, his financing proposal for the project includes $13 million in equity and $84 million combined in tax-exempt housing bonds and historic tax credits.
Reschke said last week that he aims to begin construction on the project this summer and complete it by September 2024.