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The Best Downtown Buildings On The Market Are Class-B Properties

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The $29M sale of 20 West Randolph last month showed investors are moving to Class-B and Class-C investment opportunities downtown, since most of the marquee buildings on the market changed hands in the past two years. There is demand for buildings that lend themselves to value-add opportunities.

According to MB Real Estate's Q4 CBD report, the only sales in the last three months of 2016 were Class-C assets, with a total transaction value of $150.3M. The five best investment opportunities right now have a total footprint of 2.4M SF, and all of them are Class-B or Class-C assets.

1. 404 and 412 South Wells

404 South Wacker, Chicago

Seller: George Hlepas

Size: 84k SF

Asking Price: Withheld

Asset Class: Class-C mixed-use

Nearby Developments: CMK's Riverline is a couple of blocks south on Wells and Phase 1 is well underway.

These two buildings in the South Loop are well-positioned to command big bucks. 404 South Wells, in particular, is the longtime home to Cactus, a bar popular with CBOT traders, and GRK Greek Kitchen, which has a small but quaint rooftop bar.

2. 33 North LaSalle

33 North LaSalle, Chicago

Seller: The John Buck Co.

Size: 405k SF

Asking Price: $70M

Asset Class: Class-B office

Nearby Developments: South of Madison Street, the New York Life Insurance building at 39 South LaSalle is now a Kimpton Hotel, while 29 South LaSalle will undergo a $45M office-to-apartments conversion.

John Buck meticulously restored this 38-story Art Deco tower to its Roaring '20s  glory, and added modern amenities, including a bike room, 7,500 SF fitness center, an indoor golf driving range and a conference room inside the building's bank vault.

3. 150 North Wacker

150 North Wacker Drive

Seller: American Realty Advisors

Size: 289k SF

Asking Price: $75M

Asset Class: Class-B office

Nearby Developments: Howard Hughes and Riverside Investment and Development have big plans for redeveloping 110 North Wacker.

There's been some leasing momentum at this 31-story building, thanks to $3.3M in upgrades to its common areas, lobby and elevators. 150 North Wacker leased 53k SF of space in the past 12 months, and the building's occupancy rate is a strong 92%

4. 303 East Wacker

303 East Wacker, Chicago
303 East Wacker

Seller: Franklin Street Properties

Size: 875k SF

Asking Price: $170M

Asset Class: Class-B office

Nearby Developments: This building is a couple of blocks west and north of Magellan's Vista Tower, which is rising fast.

Franklin Street Properties hired HFF to market the 28-story office building last August. The news of Tribune Media signing a 61k SF lease on the 17th and 18th floors, and a mid-2017 move-in, is an attractive carrot dangling in front of potential buyers.

5. 401 North Michigan

401 North Michigan Avenue, Chicago

Seller: Zeller Realty

Size: 761k SF

Asking Price: $325M

Asset Class: Class-B office

Nearby Developments: Everyone is taking a wait-and-see approach to what CIM Group is planning for neighboring Tribune Tower.

Zeller is hoping for top-dollar bids on the 35-story skyscraper, thanks to its proximity to the downtown core, the Mag Mile and Millennium Park. The biggest activity in the building is Apple's $62M build-out of its new Michigan Avenue flagship store, which will have the added benefit of improving Pioneer Court and the riverwalk along the building's base.