5 Massive Q4 Office Deals
In addition to a growing pipeline of new product, the Chicago office market saw a flurry of sizable investment sales in Q4, especially in the sizzling West Loop (which has 3.2M SF of new construction underway). With the help of NAI Hiffman, we rounded up last quarter’s five largest office trades, ranked by SF.
1) 222 S Riverside Plaza
Deutsche Asset & Wealth Management paid $237M, or $200/SF, for this 1.2M SF, 24-story West Loop property, as part of a two-property portfolio that sold for over $246M. As part of the deal, Deutsche transferred a 197k SF Dallas office building to the seller, TIER REIT. The Dallas-based firm (formerly Behringer Harvard) bought LEED Silver 222 S Riverside for $277.5M in 2006. In ’13 it sold off two other Chicago holdings, 10 and 120 S Riverside Plaza, to Ivanhoé Cambridge and Callahan Capital Partners for $361M, leaving just 440 S LaSalle in its Chicago portfolio.
2) 353 N Clark St
Heitman shelled out $715M ($604/SF) to seller Tishman Speyer for 1.2M SF 353 N Clark St in River North. It’s the second-highest price/SF recorded for a downtown office tower (behind $652/SF 300 N LaSalle earlier in 2014). It’s a big boon for Tishman, who paid $385M for the property four years ago, and such off-the-charts pricing for the 46-story building is indicative of Chicago’s frothy office market (that’s drawing yield-hungry capital from all over the world). Tenants at the building include Mesirow Financial and Jenner & Block (check out a view from that office above).
3) 191 N Wacker Dr
In December, Manulife Financial's private asset management arm (operating as John Hancock Real Estate in the US) announced a JV with Allianz Real Estate America to co-invest up to $1B in US real estate. As part of the deal, Manulife sold majority interest in 191 N Wacker Dr (as well as 1100 New York Ave in DC) to Allianz, while maintaining partial interest and asset management responsibilities. The 738k SF West Loop deal came down to $261M ($354/SF), a definite success given Manulife picked up the 37-story asset from Hines/CalPERS for $222M in ’04.
4) 311 W Monroe
GlenStar Properties and Prudential Real Estate Investors teamed up for this one, paying the selling JV, Golub and a Goldman Sachs affiliate, $58M ($150/SF) for mostly vacant 388k SF 311 W Monroe in the West Loop. Golub/Goldman paid AREA PARTNERS $44M for the 15-story building in 2012. The price jump is surprising given the building’s stark occupancy (BMO Harris recently vacated two-thirds of the property), but on the flipside it has those hard-to-find large blocks of space big tenants continue to clamor for. (Especially those who can’t pay for Class-A product in the pipeline.)
5) 101 E Erie St
This one’s predictably interesting, given charismatic former Strategic Hotels chief Laurence Geller’s involvement. Geller Investment Co, in partnership with Wanxiang America Real Estate Group, paid $34.2M ($148/SF) for this 231k SF North Michigan Avenue-adjacent office, sold by Lexington Realty Trust. The empty former DraftFCB HQ is on its way to becoming a 290-room Conrad Hotel, though the fate of Chicago’s other Conrad, nearby at 521 N Rush, is still TBD. And while downtown hotel repositionings seem to be a dime a dozen these days, Geller’s clout as the brains behind Strategic’s Fairmont and InterContinental make this a project to watch.