Old Post Office auction this week – 'big animal to tackle'
By Eddie Baeb and Alby Gallun
Crain's Chicago Business
August 24, 2009
One of the biggest real estate auctions in the city’s history is slated for Thursday, when the U.S. Postal Service is to sell the Old Main Post Office.
The Old Main Post Office is to be auctioned Thursday. And even though the postal service is planning an “absolute auction” — meaning the building is to be sold regardless of price, with a suggested opening bid of just $300,000 — the question remains who will step up for the roughly 3-million-square-foot building at 433 W. Van Buren St., which straddles the Congress Parkway and has been vacant for more than a decade.
The postal service says 56 prospective buyers paid $140 for a bidder’s package, which suggests to postal officials and others that the auction will yield a buyer when the gavel falls Thursday afternoon in a conference room at the InterContinental Chicago O’Hare in Rosemont.
“There is a lot of interest, locally and internationally,” says Tom Samra, the postal service’s vice-president of facilities. “This (auction) is a good method. It’s transparent and open to the public, and hopefully it will bring this to an end.”
The auction comes roughly 10 years after Chicago-based Walton Street Capital LLC first put the property under contract.
Things seemed at long last to be moving toward a groundbreaking after Walton Street got preliminary approval in 2007 for a $51-million tax-increment financing subsidy from the city. But the TIF deal never came to fruition, and Mr. Samra says the credit crunch left Walton Street unable to perform on its $310-million plan to demolish about one-third of the building and convert the remainder into offices, condominiums and a hotel.
Executives with Walton Street, which is headed by billionaire Neil Bluhm, didn’t return calls.
Auctioneer Rick Levin says open houses and building tours of the property — the largest building owned by the postal service — have brought out crowds that included “gawkers,” real estate professionals, financiers and others.
“We’ve had sophisticated, very professional real estate people,” says Mr. Levin, president of Chicago-based Rick Levin & Associates Inc. “We’ve also had some entities with a lot of money but not a lot of real estate expertise.”
Mr. Levin says visitors’ attire has ranged from suits to flip-flops. Some prospects have even made special appointments to tour the building with an engineer.
“You don’t know who’s for real,” Mr. Levin says.
During the last scheduled open house on Thursday, the father-son tandem of Michael and Shamus Conneely of Chicago-based Conneely Real Estate Co. said they were having a look on behalf of Harcourt Development, the Dublin, Ireland-based firm that is redeveloping the Titanic shipyard in Belfast. But even a developer with Titanic-sized aspirations could be intimidated by the post office.
“It’s a big animal to tackle,” Shamus Conneely says.
The postal service’s Mr. Samra says the sale has been one of his top priorities in his three-plus years on the job. In addition to spending more than $2 million on annual maintenance, he notes that a year or two before he got involved, the postal service had to spend $13 million on ventilation systems to carry exhaust from trains that go underneath the building.
“It’s costing us a lot of money to keep it,” Mr. Samra says.
A private owner would also face another unknown cost: a property tax bill. The postal service doesn’t pay tax on the building.
Still, the property drew plenty of interest when the postal service first marketed it in the ’90s. Past concepts have included a casino, auto mall, a telecommunications hub and even a water park.
Today, with commercial real estate languishing and likely to worsen, a buyer would have to be willing to spend big on a future payoff that could be years down the road.
“For anyone who can afford to be bidding at this point, this property can be a great opportunity,” says Jon DeVries, director of Roosevelt University’s Marshall Bennett Institute of Real Estate in Chicago. “But it may require a year or two of planning and approvals.”
YOU TUBE CHANNEL - Follow me on my You Tube Channel at Joe Jurek Real Estate Investing Adventures
TWITTER - Follow me on Twitter at Joe Jurek CPA
Joe Jurek CPA