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CHICAGO-German commercial real estate company Kan Am is in talks with Arlington, VA-based Mills Corp. to join the shopping center owner and developer as a 50% partner in the 108 N. State St. project. Mills Corp.'s Block 37, LLC received a favorable recommendation from the plan commission Thursday for the $336-million-plus Downtown project, and continues to assuage fears financing could doom yet another proposal for the long-undeveloped 2.7-acre site.
The community development commission last month endorsed a $12.3-million sale of the city-owned site bounded by State, Washington, Dearborn and Randolph streets, one-third its most recent appraised value, and approved Mills Corp. as master developer of a project that will include office space, multifamily units and hotel rooms. A $172-million Chicago Transit Authority subway station, providing express service to O'Hare International and Midway airports, is a separate component of the project.
Kan Am is a joint venture partner in other Mills Corp. projects, including Meadowlands Xanadu in New Jersey, and also is in negotiations for a 50% stake in Piers 27 to 31 in San Francisco. In addition, Kan Am principal Dietrich von Boetticher sits on the Mills Corp. board of directors.
In addition to a familiar joint venture, the $7.2-billion Mills Corp. has $488 million available on its line of credit, according to the REIT's third-quarter earnings report. "Financing has never been an issue," says executive vice president of development Steven J. Jacobsen. "We've never failed on any project we've gone after."
Other developers have failed to deliver on "Block 37," nestled between the Daley Center and Marshall Field's flagship store. The most recent fizzled because of a big-box retail design deemed uninspiring by city officials. "We've been spending our time working out the best economic and leasing package," says Jacobsen, who hopes to break ground by July with completion of the retail and office space by the end of 2007.
However, Jacobsen report no new retail or office leases since his appearance last month at the community development commission. CBS Channel 2 and WBBM radio are expected to anchor the 450,000-sf office tower with 100,000 sf on the first four floors.
"In very short order, we're going to make announcements on who the tenants are," Jacobsen says, adding he had meetings this week with potential hotel and residential developers who want to build the two towers on the northern portion of the site in the second phase.
"We've had a tremendous amount of interest in the other towers," Jacobsen reports. "There's a good chance we can start construction on the [multifamily/hotel] towers at the same time with the first phase."
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