The owners of the Inland Steel Building, including Frank Gehry, are going to pump $40 million or so into their acquisition, which is almost as much as they paid for the building.
The upgrades, according to Alby Gallun, consist of restoration work, upgrading the mechanicals, redoing the bathrooms and adding an environmentally sustainable roof to help get a LEED certification. Yes, roughly 40% of the money is expected to come from government sources, such as a TIF and landmark tax credits. (These deals can be winners, obviously. And I find the landmark work fun on the legal side.)
Altruism aside, there's also a practical reason for these upgrades: over 60% of the building (for which they paid $246.50/sf and now will go out of pocket roughly another $100/sf or so) is vacant or will be coming up for lease in the next year. That could be good if there's one big big big tenant that wants that space, which is the owner's goal. And a landmark building with naming rights can be great for some tenant. Otherwise, brokers will have to scramble to find a bunch of smaller tenants. Without the upgrades -- HVAC comes especially to mind in a building like this -- the space is much harder to lease. I would not be surprised if some of the upgrades take place after an anchor is identified. I don't know whether the $40 MM includes ancillary retenanting costs, too.