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Biggest Chicago suburban office sale since 2005 in Lake Zurich

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According to research firm Real Capital Analytics, the purchase price is the highest paid for an office property in the suburbs of Chicago since 2005, when the 150-acre former AT & T campus in Hoffman Estates was sold for more than $ 338 million. This price slightly cleared the 2014 deal at Tellabs’ Naperville headquarters. The transaction was a sale / leaseback transaction for just under $ 188 million.

The purchase of Northeast Capital stands out as a big bet during times of instability in the office market, and COVID-19 is driving the rise of remote work and encouraging many companies to rethink their workspace needs. Since the outbreak of the pandemic, the suburbs of Chicago have lost 3 million square feet of tenants, pushing up office vacancies.oa record 27%, According to data from securities firm Jones Lang LaSalle.

Such a background puts pressure on the property value of many suburban office landlords, and some landlords are at risk of loan defaults.

But real estate investors looking for credible revenue have overcome the headwinds of long-term revenue-generating office properties, such as the Lake Zurich campus. The Kemper Lakes Business Center is 94% leased to three large tenants, according to Bloomberg data related to Apollo’s $ 99 million real estate loan, and the lease expires in the 2030s. The loan was packaged with other mortgages, sold to commercial mortgage-backed securities investors, and their financial data was made public.

According to loan data, the 355,000-square-foot US headquarters of the German pharmaceutical company Fresenius Kabi is housed on campus on a lease until March 2034. Lender Dovenmuehle Mortgage has 247,000 contracts by May 2032. Office supplies giant Acco Brands has leased 189,000 square feet by November 2030.

This sale completes Apollo’s profitable cash out. Paid $ 127 million According to Eastdil Secured, which brokered the sale, the company spent an additional $ 25 million on a combination of recapitalization of the building and rental fees to expand transactions with key tenants. Considering inflation, the sale price was slightly higher than the total investment in real estate that did not include operating profit derived from ownership for more than 7 years.

According to Bloomberg data, the campus generated $ 11.6 million in net cash flow in 2021 for a debt repayment of approximately $ 5.9 million.

An Apollo spokesman declined to comment, and a Northeast Capital spokesman did not respond to the request for comment.

The purchase of Northeast Capital is just over six months after another New York real estate investor bought Deerfield’s office campus, which is one of the most expensive suburban office deals in years.New York-based Opal Holdings will spend more than $ 178 million in November Corporate 500 Office Complex Located in the northern suburbs, it is best known as the headquarters of the heavy equipment manufacturer Caterpillar.

Sales of suburban office properties increased 63% year-over-year in the first quarter, according to data from research firm Real Capital Analytics.

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