LaSalle Investment Management Wants To Unlock The Untapped Potential Of 123 North Wacker
Out of bankruptcy and with new ownership in LaSalle Investment Management, 123 North Wacker, one of the highest-profile warning stories of the real estate collapse, will soon be positioned for renewed leasing activity after several years in the wilderness of distress and foreclosure.
LaSalle completed its $147M acquisition on Jan. 19. The building cost $90M to construct in 1986, originally as AON Corp.'s HQ. It became one of the highest-profile casualties of the 2008 real estate collapse. A JV of 35 companies led by Sovereign Capital Management bought the building under a tenant-in-common agreement in 2005. Major capital projects for real estate assets owned under TIC contracts cannot move forward without unanimous consensus from all investors, which prevented the building from trading when its loan went underwater.
In October 2013, 123 North Wacker landed in bankruptcy court, where Sovereign proposed a recapitalization over the objections of the other owners. The property wound up in foreclosure in December 2014, when LNR Property sought to recoup nearly $135M the Sovereign-led TIC owed on the mortgage. Cook County Judge Fredrenna Lyle signed a foreclosure judgment and order of sale last February, clearing the way for LNR to place the Class-A asset on the market.
LaSalle Takes Over A Struggling Property
LaSalle Investment Management managing director Joseph Munoz said 123 North Wacker's occupancy rate was at an abysmal 57% when LaSalle acquired the building. LNR did a good job with maintenance and the building is in great health overall, but there is an immediate need to drive leasing revenue, and Munoz said that will be LaSalle's immediate focus.
Munoz said LaSalle was attracted to the property's location and how it is underserving new tenant demand in the CBD. With downtown office leasing activity being driven by corporate headquarters relocation and the ongoing influence of younger tech employees entering the workforce, 123 North Wacker is positioned to take advantage of workers commuting to downtown via CTA and Metra, and the building is situated close to the 'L,' Union Station and Ogilvie Transportation Center.
The Next Chapter: Rooftop Decks And A Sleek New Design
Munoz said LaSalle wants 123 North Wacker to be in the conversation with other buildings vying for both suburban corporate headquarters relocations and smaller tenants. LaSalle will be building out spec suites and has two contiguous 100k SF blocks inside the building to work with.
Modernizing the amenities will be another focus. Munoz said the street-level retail on the building's Randolph Street side will get a facelift for workers getting out of the office during lunch. Renovations on the Wacker Street side will focus on lobby and common improvements that will give prospective tenants an idea of what to expect if they decide to lease space there.
Munoz said LaSalle will also enter the rooftop deck game at 123 North Wacker. The building has four separate balconies that can be used as private or shared tenant space. LaSalle's goal is to upgrade the amenities while still offering lease rates that are 20% below existing Class-A CBD office space, and 40% below new construction.
UPDATE: Feb. 16, 3:38 P.M. CT: The story has been updated to remove references to co-working spaces, which may not be part of this renovation.