Retail leases launch Presidential Towers redevelopment

By Eddie Baeb, Aug. 12, 2009

(Crain’s) — A health club and a trendy  breakfast restaurant have signed leases to become the first new retail tenants at Presidential Towers in the West L oop, paving the way for a major redevelopment to take place beginning later this year.

Chicago-based Fitness Formula Ltd. has leased 52,043 squar  e feet that will be spread over two levels along Clinton Street, where a glass-enclosed, three-story atrium will be built to replace a loading dock there now.

The restaurant Yolk has leased 4,200 square feet just south of the new gym that will also front Clinton between Madison and Monroe streets.

It will be the third location for Yolk, which first opened in Novemb er 2006 in the South Loop. Both the gym and the restaurant are to open fall 2010 in Presidential Towers, a four-tower apartment complex with 2,346 units. The reconfigured retail space is being renamed the Shops at Presidential Towers.

The complex’s owner, Chicago-based Waterton Associates LLC, has applied for building permits and hopes to break ground late this fall or early winter, says David Schwartz, a Waterton co-founder and managing member.

Mr. Schwartz says getting the Fitness Formula lease completed — it had been in the works since last fall — was key for Waterton to win approval from its mortgage lender and equity partners to go forward with the retail redevelopment.

“It was really the anchor we needed,” he Schwartz says.

Waterton, in conjunction with the massive California State Teachers’ Retirement System, bought Presidential Towers for $475 million in 2007 from the billionaire Pritzker family in one of the biggest real estate sales in the city’s history.

Waterton is financing the renovation through its existing mortgage. Mr. Schwartz wouldn’t provide a cost estimate, saying it could vary.

The retail overhaul is designed to provide stores with street access, rather than the current mall-like, interior orientation that made sense when the towers were built in the mid-1980s, says Bruce Kaplan, a senior vice-president with CB Richard Ellis Inc. who is handling leasing along with CB’s Leslie Mader.

In the ’80s, the neighborhood was decidedly gritty, whereas today it’s vibrant thanks to the surge in both office and residential developments over the past decade.

The redevelopment has been slowed by the recession, which has devastated retailing, and the credit crunch, which has squeezed lending for commercial real estate projects. But both Messrs. Kaplan and Schwartz say interest from retailers has exceeded their expectations.

“In the midst of the worst real estate market in memory, this project is going forward,” Mr. Kaplan says. “Retailers are looking very hard at this, even though a lot of them have pulled in their horns.”

One deal that didn’t come together for Presidential Towers was a CVS drugstore, Mr. Kaplan says. Sources had said Woonsocket, R.I.-based CVS Caremark Corp. signed a letter of intent last year.

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