ONE 11
Creating Class A Ownership Opportunities

[ By Matthew A. Ward ]

One 11’s flexible design allows for separate entrances, lobbies and elevator banks for hotel and office users.

Chicago’s River North neighborhood is not perceived as a traditional downtown office market. Rather, it is primarily an entertainment district filled with vintage buildings, housing, high-end restaurants, popular clubs, trend-setting art galleries, and upscale shops and boutiques.

Located on the north side of Illinois between Clark and LaSalle Streets, One 11 is considered a bit off the beaten track. The building demanded a solution that represented imagination in mixed-use office/hotel development. The Alter Group concluded that the best strategy was to attract niche users by positioning the building as a Class A product – with a noteworthy difference that clearly demonstrated thinking outside the box.

The Alter Group’s core development strategy for One 11 was to provide an opportunity for entrepreneurial business owners to own Class A downtown office space as a cost-effective alternative to leasing. The crux of that strategy is to construct a multi-use building that is flexible enough to accommodate more than one use: a combination of hotel, retail, restaurant and office space.

One 11’s architectural statement stands in stark contrast to the vintage loft buildings that typify Chicago’s River North neighborhood.

Owning vs. Leasing Advantages

Previously, companies that prefer the ownership option were limited to Class B and C office condominium properties. These are typically in older buildings, located away from the CBD, and provide little or no opportunity to project a high-end corporate image. The 10-story, 227,604-square-foot One 11 tower was deliberately positioned as a Class-A-to-own option that let businesses own their space in a building that equals the quality of a premium-priced skyscraper – but at 40 percent of the cost of leasing. Owning office space at One 11 puts the real estate to work for owners because it lets them build equity; enjoy tax advantages like long-term appreciation; stable occupancy costs; and estate-transition planning, if appropriate.

There are several reasons why it can make sense monetarily for businesses to own their space. The key rationale is that owning assures control over taxes, utility costs and inflation. Another benefit is the flexibility to reconfigure space as the business grows and changes, with the assurance of Tier 1 service throughout the facility’s life.

Because the building’s location is in an entertainment district, the marketing strategy specifically targets entrepreneurial companies trying to recruit young echo boomers as their employees. One 11’s branding straddles Wall Street professionalism with an urbane, stylish sophistication comparable to a lifestyle or fashion brand. The core brand identity, verbal messaging and talking points are key factors in expressing the development’s chic nature, its location and the type of organizations that The Alter Group is targeting as potential users.

Spacious common areas are enjoyed by tenant Erikson. These rooms begin in the school’s soaring two-story lobby, and include a free-form second-floor “commons,” lined by curving glass walls and outfitted with desks where students can plug in their laptops.

Architectural Challenges

Because One 11 occupies a highly urbanized location, its construction posed several challenges, due to the density of the area and the proximity of neighboring buildings. Chicago architect Martin Wolf, FAIA, senior principal with Solomon Cordwell Buenz & Associates, was challenged by two adjoining, three-story buildings not owned by The Alter Group. These buildings occupied part of the site and back up to an alley so the architects designed around the buildings by creating a dramatic prow-like edge that resembles the front end of a ship. The design achieves a contemporary, geometric presence that ties One 11 to its modern neighborhood.

Although primarily a speculative building, One 11 was partially owned at its January 2007 groundbreaking. The Erikson Institute, a graduate school for child-development professionals, had taken 75,000 square feet on three floors in order to create a “vertical” campus. Erikson has spacious common areas where students can gather. These rooms begin in the school’s soaring two-story lobby, located within the building’s prow, and include a free-form second-floor “commons,” lined by curving glass walls and outfitted with desks where students can plug in their laptops. On the second floor, 12-foot ceilings were built at Erikson’s request to accommodate a library and expansive classrooms. Other design details include organic wood sculptures and three-dimensional, cable-suspended lights on the library ceiling.

A key factor in Erikson’s decision to purchase the space was the tax-exempt financing and the real estate tax exemption. This economic incentive gave Erikson the ability to purchase almost double the amount of space they previously occupied, and at a much lower cost than leasing comparable space. Erikson moved into the building in August 2008 and has its own lobby at the northwest corner opposite a plaza, a prominent street-level presence and a dedicated address of 451 North LaSalle Street.

Speeding the Development Process

The Alter Group used their own capital to develop One 11 – once The Erikson Institute was on board as the lead user. Lines of credit were established through long-term relationships with leading financial institutions to fast-track construction. Additionally, relationships with suppliers and subcontractors were leveraged to pre-order materials and services, minimizing conventional lead times.

As designed by Martin Wolf, the building incorporates a suite of green-building, sustainable design and performance elements. The building’s significant technological capabilities include 10 watts/psf of electrical capacity; a high-density HVAC system that assures maximum flexibility; energy-efficient low-e glass; a high-efficiency air-handling system; a dedicated telecommunications room that accommodates multiple fiber carriers; dual power grids; an automatic transfer switch to assure an uninterrupted power supply; and ample room for dedicated-user generators. In addition, two rooftop decks provide a dramatic space for corporate events, and are topped by the structural-steel prow that is One 11’s signature architectural detail.

Construction Challenges

The design incorporated multiple entrances so each potential building user could maintain a separate identity. At the same time, efficient elevator usage had to be assured. This required designing a single elevator core that would accommodate two different types of potential users, and assure that they would not commingle.

Because The Alter Group secured a lead tenant that is a graduate school during the initial design phase, they now had three distinct uses. That meant the building would now require three separate entrances, should they also acquire the desired hotel and office users.

The graduate school’s presence also added the element of assembly occupancy (a City of Chicago Department of Building requirement applied to spaces where more than 50 people occupy a single room simultaneously). This required a change to items like the exit stairs’ design and the fire-alarm system to accommodate the higher population densities.

Lessons Learned

The bottom line -- be flexible. This means integrating certain systems (exits, elevators, entrances, etc.) into a single, seamless design that works as a whole, but can be modified at any time. An example is the toilet rooms for the potential office portion, which typically are placed in the building’s central core to maximize window space in offices. Building toilets was held back in the event those floors are taken by a hotel user, which would require an entirely different configuration.

In terms of best practices in designing and developing One 11, it helped to have a versatile architect like Martin Wolf. His design is flexible and he was willing to accommodate the diversified scope. The mixed-use model is extremely demanding on design if it is to successfully accommodate multiple uses. In constructing the building, general contractor McHugh Construction was flexible and tweaked the design of certain areas when necessary.

From the perspective of McHugh project manager Lance Jensen, the project’s biggest challenge was successfully constructing the building’s signature prow that distinguishes the west end. McHugh had to maneuver the multiple components with split-second timing so that they aligned exactly as designed. Additionally, McHugh maintained a tight schedule to complete the building’s shell construction in just 14 months, through a cold and snowy winter.

Since its completion, One 11 has been one of Chicago’s most written-about new buildings. Pulitzer Prize-winning architecture critic, Blair Kamin, of the Chicago Tribune, wrote “Architect Martin Wolf sliced the building on a diagonal and opened a triangular outdoor plaza in the bargain.”