In the News - 566 West Van Buren Street

Riverside Investment & Development and Blue Star Properties are planning a 198-unit apartment building at
566 West Van Buren Street in Chicago. (Antunovich Associates)

Developer of Chicago Trophy Office Towers Plans Its First Apartment Project in City

Riverside Investment & Development Looks To Diversify Portfolio With 14-Story Residential Building

By Ryan Ori
CoStar News

July 5, 2022 | 5:14 P.M.

A developer that has built three trophy office towers near the Chicago River in recent years is planning its first apartment project in the city, taking a step to diversify its portfolio more than two years into the pandemic.

Riverside Investment & Development plans to break ground on a 198-unit apartment tower on the southwestern edge of the Loop business district late this year, the Chicago developer said.

The 14-story building at 566 W. Van Buren St. is expected to be completed in early 2024.

It is just a half-block from Riverside’s recently opened BMO Tower office development at 320 S. Canal St. That 52-story office tower along Union Station is anchored by BMO Financial.

Previously, Riverside developed a 54-story office tower at 150 N. Riverside Plaza and the 55-story Bank of America Tower at 110 N. Wacker Drive. A recent sale of partner Howard Hughes Corp.’s controlling stake in the Bank of America-anchored skyscraper valued that property at more than $1 billion.

The smaller residential project on Van Buren is part of a plan by the firm, which is led by John O’Donnell, to expand into new cities and types of properties other than offices.

Riverside previously developed a nine-story apartment building in nearby Evanston, Illinois, and it now has a 32-story office tower under construction in Denver. The firm also plans a three-tower apartment and office project in Charlotte, North Carolina’s in-demand South End neighborhood.

“In Chicago and the two other markets where we’re going to have a long-term presence, the idea is to build more mixed-use, with residential and office,” Riverside Chief Operating Officer Tony Scacco told CoStar News. “For obvious reasons, it will be difficult to launch large-scale office projects in the near term. We see opportunities on the residential side that will be a good fit for the company.”

Riverside is looking at additional sites in the city and in Chicago’s suburbs, as well as potential opportunities to convert older office buildings into apartments, Scacco said.

The apartment project is in a joint venture with another Chicago developer, Blue Star Properties, which has its offices in a nearby loft office building it owns at 328 S. Jefferson St.

Blue Star’s president, Craig Golden, is co-founder of 16” on Center, which recently opened a large food hall in the redeveloped Old Post Office a short walk from the Jefferson and Jackson buildings.

The 26,000-square-foot development site, assembled through acquisitions of parcels by Riverside and Blue Star, includes two- and three-story buildings that will be demolished in the coming months. Construction of the $75 million to $90 million project is scheduled to break ground by the end of the year, the firm said.

Lendlease is the general contractor.

The development is as-of-right, meaning it does not require any zoning changes from the city, 42nd Ward Alderman Brendan Reilly said in a note to constituents describing Riverside’s plans last week.

Designed by Antunovich Associates, the project along Van Buren and Jefferson streets will include 2,500 square feet of retail, 76 vehicle parking spaces, 99 bicycle spaces, a private dog run and a rooftop pool and amenities area.

Office Return Anticipated

The apartment project looks to capitalize on increased density in the once-quiet southwestern corner of the Loop, which is expected to be rejuvenated by thousands of additional workers pouring into BMO Tower and the sprawling Old Post Office as more employees return to the office.

The firm already had planned to add residential projects before the pandemic, which brought on the work-from-home shift that has pushed up office vacancy throughout the country. There is now a combined 96.9 million square feet of available office space in the Chicago area, or 18.9% of the total supply, according to CoStar data.

Scacco said developers are bracing for “a lot of headwinds in Chicago in the near term,” including concerns about rising property taxes, crime and other problems that have caused some institutional investors to avoid Chicago investments.

That is coupled with challenges in the national market, including rising interest rates, inflation, high construction costs and material shortages, Scacco said.

The size of 566 W. Van Buren, smaller than the scope of Riverside’s office skyscrapers, will make it easier to finance. Riverside is in the process of securing construction financing, Scacco said.

“On the back half of the project, when you look to recapitalize or exit the deal, it’s a much murkier picture,” Scacco said. “We’re trying to play in a deal size where the pool of buyers is as broad as possible.”