By John Handley

Eighty people have put down money to live in a cold-storage building.

No, this is not a "Survivor" scenario of braving dark, damp, dingy and chilly spaces. When new residents move into the Produce Terminal Cold Storage Co. building at 1550 S. Blue Island Ave., they will be plenty warm.

The 11-story concrete hulk, built in 1929 some 3 miles southwest of the Loop, is destined to shake off its non-descript exterior and reappear as a condominium with large windows, balconies and a rebuilt interior with 231 units.

Renamed University Station, the cold-storage facility is just one of several aging and obsolete buildings in and around downtown Chicago that are being converted into housing.

These candidates for rebirth include high-rise offices, industrial loft buildings, a hotel, a department store and a produce market.

Called adaptive reuse, the recycling process became trendy here in the late 1980s and early 1990s, as old buildings in River North, the West Loop and South Loop were converted. But, as the supply of suitable buildings was used up, developers turned to new construction to meet the increasing demand for downtown living.

Now a new cycle of recycling is under way.

"Adaptive reuse sales surged during 2004," said Gail Lissner, vice president of Appraisal Research Counselors, a Chicago firm that tracks the real estate market. "There were more adaptive reuse contracts in the first half of this year than during the entire years of 2003, 2002 and 2001."

She said that four new adaptive reuse projects began in the second quarter of this year and two more in July. "Five of the six buildings were located in the West Loop/UIC market and the sixth was in the Loop."

A total of about 1,500 new adaptive reuse units have been announced this year.

Lissner added, though, that the boundaries of downtown have been stretched to include such projects as University Station and University Commons, both just south of the campus of the University of Illinois at Chicago.

Before the current surge in adaptive reuse projects, "not much was happening in recent years," Lissner said. "The demand always was there, but developers were having difficulty finding suitable buildings for conversion."

She said most of the new projects are targeted at a middle price range, though Metropolitan Tower, overlooking Grant Park and the lakefront, "is pricier because of the views."

"Lofts are red hot. They're unique. They sell well, especially to entry-level buyers," said Charles Huzenis, president of Jameson Development.

Elizabeth Sujewicz, 24, is typical of first-time buyers attracted to lofts.

"I prefer real timber lofts with exposed brick and an older facade," she said. After looking for a year, she bought at No. Ten Lofts at 1040 W. Adams St., where prices range from $202,900 to the mid-$500,000s.

"Lofts offer a more spacious environment," said Sujewicz, who grew up in Naperville. She selected No. Ten Lofts in part because it's an easy drive to her job at a mortgage company in Oak Brook.

"This Near West area has changed like night to day since I was in high school. It has more of a neighborhood feel now, with a lot of trendy restaurants," she said.

No. Ten Lofts is a joint venture of Centrum Properties and MCZ Development Corp.

Preservationists support the redevelopment of aging structures. "The bottom line in adaptive reuse is preservation," said David Bahlman, president of the Landmarks Preservation Council of Illinois.

"Adaptive reuse is absolutely critical when a building declines and can't support its original function. It then becomes gentrified to make it economical again," Bahlman said. "Most developers use adaptive reuse for the tax incentives. They can recoup 20 percent of the cost of rehab."

He noted that there is a pecking order of preservation, with the highest level being restoration, followed by rehabilitation, adaptive reuse and replication.

One of the recycling projects that is taking advantage of its historic status is the cold-storage building. On the National Register of Historic Places -- in part because it exemplifies Chicago's long-time role as a major hub of national food distribution -- it also is embellished with Art Deco motifs. The units are priced from $176,900 to $428,900.

After it is rehabbed into University Station, buyers will receive an eight-year tax freeze.

Ted Mazola, president of New West Realty and a partner in 1550 S. Blue Island Development Co., estimates that annual real estate tax bills during the freeze will be about $300 per unit. He noted that the cost of units in adaptive reuse projects can be $40 to $50 a square foot less than in new construction condos. "For the builder, buying a shell is cheaper than putting up new walls. Also, rehabs take about 14 months to do, while new construction is 20 months."

Conversion, though, can present problems. At the Ambassador West Hotel, space for 225 rooms is being transformed into 38 condominiums priced from $1.1 million to $6.5 million.

"We had very large structural columns to conceal," said Fernando Leal, managing partner of L3 Development.

He said the decision to sell the hotel came from declining occupancy and the need for an expensive rehab of the 1920s-era building.

One of the most visible structures slated for residential conversion is the old Straus Building at 310 S. Michigan Ave. Designed by the renowned Chicago architectural firm of Graham, Anderson, Probst & White, it was completed in 1924. The 30-story office building, known for its blue light shining from its pyramid top, will become Metropolitan Tower with 245 condos priced from $280,000 to more than $1 million.

After gutting the interior, it will become "essentially a new building inside," said Louis D'Angelo, president of Metropolitan Properties, the developer.

"There are only a handful of opportunities for residential conversion along Michigan Avenue, but Millennium Park is the icing on the cake that has created enormous demand," said D'Angelo, president of the Central Michigan Association.

Another Loop office tower slated for conversion is the old North American Building at the northwest corner of State and Monroe Streets. Designed by the noted architectural firm of Holabird & Roche and built in 1913, the 21-story structure will be redeveloped into the Metropolis, with 169 units priced from the low $200,000s to the upper $400,000s.

"There are a lot of challenges in adaptive reuse," said Keith Giles of Frankel & Giles Real Estate and a partner in the Metropolis, along with State Street Development Corp. and the WOW Group.

"We have to make the units fit the existing floor plate, relocate elevators and stairways and preserve the terra cotta facade," Giles said.

To blend in with the retail character of State Street, the first two floors will be leased to stores.

Despite the crop of adaptive reuse projects under way, the recycling boom's days may be numbered.

Michael Lerner, president of MCZ Development and a pioneer in adaptive reuse in downtown Chicago, sees a limited resurgence: "Very few adaptive reuse buildings are left in neighborhoods where people want to live."

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Current projects

Here is a sampling of other adaptive reuse projects downtown.

- University Commons is the new name for the South Water Market, which opened in 1926 on 11 acres south of UIC. The conversion, planned for 850 condos, is under way, even as some produce companies still are operating at the western end of the market.

- Van Buren Lofts, just north of the Eisenhower Expressway at 1224 W. Van Buren St., is another Near West Side warehouse that is going residential. The six-story structure will be converted into 189 units.

- Paramount Lofts, a former Weiboldt's department store at 130 S. Ashland Ave. on the Near West Side, is being gutted for 207 units.

- The Montgomery, the former Montgomery Ward headquarters on Chicago Avenue just east of the North Branch of the Chicago River, has lost its "Darth Vader" look as blue windows have replaced black ones. It is planned for 243 units.

- The Palmolive Building Landmark Residences are being built in the former 37-story office building at the north end of Michigan Avenue. Built in 1929, it became the Playboy Building from 1967 to 1989 and now will contain 102 condos.

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