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Merchandise Mart owner plans to build apartment tower across river

After transforming the Merchandise Mart into a top destination for technology firms and big headquarters relocations, the owner of the River North behemoth is turning its attention to an obscure property it owns nearby: a parking lot where it wants to build an apartment tower.

Vornado Realty Trust is ramping up plans for the site it owns across the Chicago River from the Mart, at Kinzie and Canal streets, according to sources. The surface parking lot is along the north side of a Cassidy Tire & Service building.

Under current zoning for the site, Vornado could build a tower of 30-plus stories, with more than 200 apartments. The firm could seek changes to the zoning, which has been in place since 2001, if it wants to include more units on the site in the Fulton River District.

New York-based Vornado's efforts to kick-start the development come almost two decades after the real estate investment trust bought the property as part of its 1998 acquisition of the 4.2 million-square-foot Merchandise Mart.

Vornado's exact plans for the parking lot are unknown. Chicago-based Vornado executive Myron Maurer, chief operating officer of Vornado's Merchandises Mart Properties unit, declined to comment.

In a 2015 letter to Vornado's zoning lawyer for the project, John "Jack" George, the city's Department of Planning and Development confirmed that zoning for the 26,189-square-foot site allows a tower as high as 365 feet, with as many as 228 apartments, public records show.

If Vornado kicks off construction relatively soon, it will do so amid an apartment boom in the area, and throughout downtown Chicago. A combined 12,500 new apartments units are expected to be completed downtown in 2017, 2018 and 2019, according to Chicago-based consulting firm Appraisal Research Counselors. That would be a three-year record for apartment construction downtown.

"We're seeing record numbers of apartment deliveries, but we're also seeing record absorption," said Gail Lissner, a vice president at Appraisal Research Counselors. "Leasing numbers are very strong for new product."

Although Vornado will face competition from thousands of new units, building apartments is an opportunity to cash in on thousands of jobs it has brought to the area by modernizing the Mart.

The development also could capitalize on close proximity to two recently completed office towers along the river and the rise of the Fulton Market district to the west, which includes Google's Midwest headquarters and the future McDonald's headquarters now under construction. Other apartment developments in recent years include the five-tower K Station project by Chicago-based Fifield Cos. and, just across the river, the recent completion of the first of a planned three Wolf Point towers.

"It's a walk-to-everything location, and there's good connectivity to transportation, whether it's the CTA, Metra or expressways," Lissner said. "It's a very interesting location because it's on the edge of three markets. It's the far eastern edge of the West Loop and it's adjacent to River North and the Loop. We've seen significant office development in the area, along with demand for office space in the Mart."

Vornado has converted huge blocks of former Mart showroom space into offices in recent years, making way for Conagra Foods, Motorola Mobility and Beam Suntory to move their headquarters into Chicago. The Mart also has signed leases with other tech tenants such as Yelp, Braintree, the 1871 incubator and an innovation center for insurer Allstate.

The Mart has about 3.6 million square feet of rentable space, which is almost 99 percent leased, according to Vornado public filings. Recent renovations have added a 50-foot-wide marble staircase, tenant lounges, outdoor spaces, restaurants and bars.

Vornado acquired the parking lot and the Mart in a 1998 deal with the Kennedy family. The $625 million deal also included the former Apparel Center — which Vornado has since sold — and other land near the River North buildings, as well as properties in Washington, D.C.

The family of Chris Kennedy, who's now seeking the Democratic Party nomination for the Illinois governor's race, kept the Wolf Point land that it's now developing on the river near the Mart.

Vornado, a big real estate investor in other cities including New York and Washington, is best known in Chicago for its ownership of the Mart. Vornado also has developed land in Chicago, including a 452-unit apartment building on LaSalle Street that it sold in 2005.

rori@chicagotribune.com

Twitter @Ryan_Ori

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