Auction signs have gone up where the Congress Highway goes through the Old Post Office

For the price of a condo, you very well could buy 2.7 million square feet in downtown Chicago.

Sadly, after 13 years of failed re-development efforts, the US Postal Service is auctioning off what was once described as the world?s largest Post Office with a suggested opening bid a measly $300,000. Hard to believe that at its peak, 5,000 workers processed more than 35 million letters annually, using 10 miles of conveyor belts and 48 elevators. The building was vacated in 1996 when the Postal Service built a new more technologically advanced building just a block away. Since then, many development plans, including a data storage facility, condos and a hotel, have come and gone as market conditions changed.

While one might argue that $300,00 might seem like a steal for this amount of space in downtown Chicago, keep in mind that it?s not so much the acquisition cost but the development cost and the annual maintenance costs. Even in its current vacant state, the cost for utilities, maintenance and security is approximately $2.5 million annually.

The behemoth, which is nine stories tall with 14-story corner towers, is several blocks southwest of the Loop, the downtown central business district. It was designed by Graham, Anderson, Probst & White in a Neoclassical/Art Deco style and built in phases from 1921 to 1932. The total cost was $22 million. A peculiarity of the building is that it was built using air rights over railroad tracks that terminate several blocks to the north, at Union Station, and so it has no basement. In addition, the Congress Expressway literally passes through the structure.

The auction, to be held on August 29, 2009, is one of many that the Postal Service expects to conduct as it begins a major downsizing effort aimed at aligning capacity with declining volume. As the mail sorting process becomes more automated, we may see more auctions like this one unfortunately.

(Stacy Braack contributed to this post.)

We would like to thank Thomas Merton for sharing today’s photo via the Creative Common’s License.

5 August 2009 – Today the bond market opened down 31 bps. On Monday and Tuesday combined the bond market was down a total of 94bps. The bond market then bounced back due to a weaker ISM report (46.4 versus the expected 48). Also more job losses were reported, expectations were for job losses to come in at 350,000 and actual number was 371,000. These reports helped to correct the bond market and this was sorely needed. The bonds are now currently up 19bps for the day, which is a gain of 50bps since the open this morning. The Treasury announced a $75 billion auction next week, again too much supply versus the demand for these auctions continues to weigh on the bonds. At some point higher yields will have to be paid to continue to attract buyers and this is when we will see the mortgage rates rise. Again the 30 year fixed for the well qualified buyer would be around 5% to 5.125%. The 15 year fixed rate would be at 4.5% to 4.625%.

30 July 2009 ? Today the bonds opened down 6 bps and continued to slide and are currently (12:00 p.m.) down 22. The seven-year Treasury Note auction is today at 1:00 p.m EST and this may pressure bonds again. No auctions are scheduled next week, but we need to get through this week’s auctions for bonds to hopefully stabilize. The supply is too much for the market to absorb, which is pressuring mortgage rates. We are still in the low 5?s but creeping up slowly. The DOW is booming today?up 140, which is also pressuring the bonds.

The Old Post Office was used extensively in the last Batman movie

The Postal Service has decided to auction off the site of the old post office at 433 W Van Buren. Built in 1932, this building straddles the Eisenhower Expressway and is on the National Register of Historic Places. It was the largest postal facility in the US, but was vacated in 1995 when the USPS moved this facility to a nearby location on Harrison St. This structure is 14 stories tall and over 2.5 million square feet.

Since 1999, The USPS has attempted to sell the old post office to Walton St. Partners. Walton St. has developed a $300 million plan for the building which would include a hotel, office space, condominiums, and a park. They have spend a great deal of time to obtain plans, rezoning, public subsidy, and financing. Due to the current market, financing this endeavor has been a challenge. The USPS has a budget deficit and is paying several million each year to maintain this empty building. They are no longer willing to wait for Walton St. to finalize their plans.

2.5 Million Sq. Ft. in Downtown Chicago for the Price of a Condo?

When a property is unique and difficult to price, an auction is often the best way to receive the best price in the shortest amount of time. The Postal Service has hired Rick Levin & Associates to conduct an open auction for this site on August 27. The suggested opening bid is $300,000 and the building must be sold.

We’d like to thank FHKE for sharing today’s photo via the Creative Commons License.