South Works parcel goes to McCaffery

July 13, 2004

BY DAVID ROEDER Business Reporter

Chicago developer Daniel McCaffery, whose local deals have redefined the shopping mall and rescued a State Street landmark, has gained control over the largest piece of vacant real estate in Chicago.

McCaffery leads a team that has a contract to purchase most of U.S. Steel Corp.'s former South Works site, a tract with the topography of a moonscape but a dazzling location, a lakefront stretch about 10 miles from downtown.

With financing from Lubert-Adler Funds and a partnership with Westrum Development Co., both based in Pennsylvania, McCaffery will be the main local force crafting plans for a 275-acre stretch running from about 81st to 85th streets. It's the final piece of what was originally a 573-acre tract.

McCaffery said he envisions a mix of homes and commercial development, but insisted he has no firm plans in mind. His deal isn't expected to close until well into 2005, and will trigger meetings with community groups and city officials over what eventual zoning will allow.

"We're all going to have to find a common ground,'' he said. Asked about the potential number of residences, McCaffery offered no estimate, saying only that "we certainly need to build whatever justifies the property's sales price.''

He and U.S. Steel would not disclose terms. Sources said the land sold for about $70 million after spirited bidding from several parties. Top contenders included Chicagoan Robert Zoretich with the Moceri development family in Michigan, and the high-profile team of Richard Stein and Michael Marchese, developers of the University Village homes complex on the Near West Side.

A spokesman for U.S. Steel said the company's board is expected to approve the sale contract late this month.

McCaffery said the project faces a lengthy planning process, but he insisted his group has the financial wherewithal to withstand ups and down in the marketplace. "We're putting a significant amount of money at risk immediately,'' he said.

"As a developer, I wish I could start on this tomorrow. But we have to do the right thing'' and reach a consensus with the community, he said.

The sale does not affect the other major piece of South Works, more than 100 acres at 87th Street. U.S. Steel sold it in 1999 to Solo Cup Co. as a site for a new factory.

While the city held a ceremonial groundbreaking there in 2002, Solo Cup has yet to proceed with major construction. The company's president, Ronald Whaley, said Monday that while he's still committed to the new plant, he couldn't tell when construction will begin.

Solo Cup, he noted, has been preoccupied with its purchase of Sweetheart Cup Co.

McCaffery's development credits include Nike Town on Michigan Avenue and the renovation of the landmark Reliance Building at 32 N. State to become the Hotel Burnham. His company is building the Bernardin, an apartment building at the southeast corner of Chicago and Wabash. In Schaumburg, it transformed an eyesore shopping center into the Streets of Woodfield, a plaza that blended elements of a shopping mall with a traditional downtown.

U.S. Steel closed South Works in 1992, and began an environmental cleanup. In 1997, the Illinois Environmental Protection Agency certified that the land was fit for human habitation.

Although the steel mill employed more than 20,000 people in its heyday, it never included a coke plant, which would have left more pollution behind.

U.S. Steel has reserved much of the site for open space, including the stretch closest to the lake.

Peter Scales, spokesman for the city's planning department, said the sale to McCaffery "means progress. We knew there was a lot of interest there.''

He said the city hopes to move quickly on a key component, a realignment to U.S. 41 to provide direct access to the property. Long-term plans also call for some of the acreage to be reserved for a new public school.

Scales said some of the lakefront landscaping will be planted next year.