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January 5, 2015

Chicago's Four Hottest Office Developments

Hint: They're all surrounding the fork in the Chicago River, blocks from River North, the Merchandise Mart and burgeoning Fulton Market. Let's take a look:

1. 150 N Riverside

O'Donnell Investment Co/Goettsch Partners

O'Donnell Investment Co may have two more years until the 1.2M SF 150 N Riverside (financed by a $296M construction loan) delivers, but leasing's been lightning fast. Its latest coups: Hyatt Hotels will move its 250k SF HQ into the tower (from 71 S Wacker) in 2017, and Polsinelli signed a 13-year lease for 112k SF. O'Donnell also has key leases from William Blair (318k SF), Victory Park Capital Advisors (26k SF) and the Pritzker Org (42k SF). Millennials like their offices close to public transit, John O'Donnell told us this fall, and technology continues to help them adapt to high-density work situations (whether that's HVAC, electrical or WiFi).

2. River Point

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The 1M SF River Point (444 W Lake St), Chicago's first spec office tower (future home to McDermott Will & Emery and DLA Piper) in more than a decade that some say could sell for $700/SF in five years. We took this shot on our way to an Oktoberfest event on the newly finished riverwalk in October. That kind of sale price, astronomical as it seems, is cheap for a foreign, long-term investor, LaSalle Investment Management's David Schreiber said. It's a collaboration of Hines, Ivanhoé Cambridge and The Levy Org (designed by Pickard Chilton), and Ivanhoé's even copying the building's method of straddling railway tracks at its latest 2.5M SF project in Toronto.

3. Wolf Point South Tower (Phase II)

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Here's a shot of the future 48-story apartment tower on the way at Wolf Point from River Point's riverwalk, taken in the fall. On the same site, 1.2M SF of office could break ground in the next few years as the three-tower, $1B project (a JV among the Kennedy family, AFL-CIO Investment Trust, Magellan Development and Hines) progresses. The planned South Tower, designed by Pelli Clarke Pelli, would be the site's tallest at 950 feet and would likely include a mix of office, hotel and retail. As we've seen with the neighboring towers already underway, the key to getting a green light will be snagging anchor tenants in this increasingly competitive luxury office landscape.

4. 151 N Franklin

The John Buck Co/John Ronan Architects

Property management is involved in building design from day one, especially when you're working with a 32-story blank canvas like The John Buck Co's 151 N Franklin, principal Betsy Traczek told us. (Think flexible HVAC to isolate floors and bill directly to tenants.) Buck's plans first materialized in late 2013, when the firm raised $145M in equity for the project. With any luck, the firm will have major tenant moves to report by this summer's Spring Fling. Also on TJBC's drawing board: 200 N Michigan Ave, 41 stories of multifamily that broke ground in October.

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Top stories on Bisnow.com

Shake Shack Announces IPO Report: Home Prices Stabilized in October
Mergers Hit Seven-Year Peak in 2014
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Chicago, Meet Wang Jianlin
and his $25.3B

At the helm of Beijing-based Wanda Group, Wang Jianlin added $12.8B to his fortune in 2014, and with a net worth of $25.3B he could soon be Asia's richest person, the Daily Herald reports. (Dalian Wanda Commercial Properties raised an unprecedented $3.7B in its recent IPO.)

Why should you care? Wanda and Magellan Development are building the $900M, 88-story Wanda Vista (hotel, condo, retail) in Lakeshore East. It's the largest investment by a Chinese company in Chicago and could become the city's third-tallest building.

In case you find yourself crossing paths with Wang while he's here on a site visit, some interesting facts: He's the oldest of five brothers raised in a military family in the Sichuan province (his father fought for Mao's Red Army in the ‘30s and during WWII), according to Bloomberg, and he likes to sing Tibetan and Mongolian folk songs at company annual meetings.

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This Week's Chicago Deal Sheet

SALES

Essex Realty Group's Jim Darrow and Jordan Gottlieb repped the seller and Doug Fisher repped the buyer in the $2.7M sale of 932-40 W Dakin St (pictured), a 27k SF warehouse building built in 1914 by the ER Moore Co in Lakeview. The building may be a candidate for the National Register of Historic Places and offers the opportunity for conversion of the existing structure into loft apartments or condos, with potential Federal rehab credits.

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Lee & Associates of Illinois principal Brian Vanosky and associate Tim McCahill repped Red Hen Bread in its purchase of a 40k SF food grade industrial building at 745 N Larch in Elmhurst. Nicolson Porter & List's Mark Barbato repped the seller.

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Sean Sharko, Adrian Mendoza and Austin Weisenbeck, investment specialists in Marcus & Millichap's Chicago Oak Brook office, and Kyle Stengle, an investment specialist in M&M's Chicago Downtown office, repped the seller, an LLC, in the $3.6M sale (5.5% cap rate) of Chase Bank | European Wax | Wrigleyville, a 5,893 SF retail property at 3728-3730 N Southport Ave in Lakeview. This is one of the lowest cap rates ever achieved for multi-tenant retail in the Chicago area. Zachary Weiss and Preet Sabharwal, investment specialists in M&M's Manhattan office, repped the buyer.

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AIV purchased a 15k SF industrial building at 1520 Ardmore Ave in Itasca. Lee & Associates of Illinois principal Jeff Janda and SVP Mike Plumb repped the seller, Prologis. SCGroup Real Estate's Edward Viliunas repped the buyer.

LEASING

500 W Madison (pictured) secured leases totaling 73k SF in December (including HERE North America for 8,559 SF and National Financial Partners Corp for 36k SF), bringing total leasing activity at the building to 145k SF for 2014. Owner KBS REIT III also has extensive capital improvements underway on the 1.5M SF building (atop Ogilvie Transportation Center), now 95% occupied. Transwestern EVP Michael Lirtzman and VP Courtney Baratz are exclusive leasing agents for the property. KBS' repositioning plan includes upgrades to public spaces, a new tenant lounge, an expanded conference center and a new 11k SF fitness center.

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Lear Corp leased 93k SF of industrial space at 6750 Daniel Burnham in Portage, IN. Lee & Associates of Illinois principal Brian Vanosky and associate Tim McCahill repped the landlord and CBRE's George Maragos repped the tenant.

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Dixon Valve & Coupling Co leased a 30k SF industrial building at 1011 Hilltop Dr in Itasca. Lee & Associates of Illinois principals Jeff Galante and Jeff Janda repped the landlord, Liberty Property Trust. Transwestern's Joe Karmin and Justin Lerner repped the tenant.

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JK Global leased a 20k SF industrial space at 1100 Arthur Ave in Elk Grove Village. Lee & Associates of Illinois principals Chris Nelson and Jeff Janda repped the landlord, KTR Capital. Cawley Chicago Commercial Real Estate's Terry Herlihy repped the tenant.

FINANCING

HFF managing director Danny Kaufman, senior managing director Mike Kavanau and managing director Steve Skok arranged $118M in financing for 496-unit K2 (pictured) in the West Loop, recently acquired by The Georgetown Co. HFF worked on behalf of Georgetown to secure the 10-year, fixed-rate loan through Freddie Mac's CME Program. The securitized loans will be serviced by HFF through its Freddie Mac Program Plus Seller/Servicer program. The property is 96% leased and Georgetown plans to upgrade public spaces and amenities.

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Why Thermostats, Crowded Trains and Eating Out Matter

Sometimes the most comforting economic indicators come from the most unexpected places. You can look at a strong Chicago Purchasing Managers Index and unexpectedly robust retail sales to see a positive outlook for the Chicago economy, Crain's Chicago Business reports. But here are some more surprising signs that the city's financial confidence, and real estate in turn, is improving:

  • ComEd seeing its highest growth in electricity consumption since the recession (well, this one's only good news if you're not footing the bill).
  • CTA rail ridership up, especially in the Loop and River North (hence the boost in TOD).
  • We spent $700M more eating out in 2014 compared with 2013 (better cozy up to those restaurant tenants).
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