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Downers Grove landlord seeks a big cash-out

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Selling in that price range has been one of the largest suburban office property transactions in years, while the rise of remote work has boosted workspace demand and kept suburban office vacancies at record heights. Will stand out. According to DuPage County records, after the owner pays a little less than $ 129 million for the property, it will also complete a turnaround in favor of the owner within three years.

Jacques Kim, Principal and CEO of Kore, said his company is interested in maintaining a stake in real estate and will sell the building altogether, even though BentallGreenOak is considering unloading the property. It’s possible, but “not in our plan,” he said.

“We want to continue what we are doing. Ideally, we will hold this asset for a long time,” he said.

The 620,000-square-foot building (also known as Esplanade II) shows that the gap between the highest quality and lowest quality office buildings in the suburbs is widening. The former group landed most of the leasing activities during the public health crisis, while the latter prioritized buildings that helped employees to appear, rather than companies working from home. I had a hard time.

Kore and Bentall GreenOak recently proved the resilience of 3500 Lacey as one of the top performers in the suburbs after signing a deal with their largest tenant, supply chain management company Havi Group. Relocate the head office From Downers Grove to the Downtown Fulton Market area. Havi implemented the option to terminate the 27% lease of the Downers Grove office building at the end of August 2022 and searched Kore to fill the space in the face of weak demand.

But it didn’t take long.Owner earlier this year Signed a 133,077 sq ft lease HealthCareServiceCorp. Gets almost all of the space left by Havi. Blue Cross & Blue Shield, the parent company of Illinois, has moved its suburban office from another Downers Grove property to a building.

According to Kushman’s flyer, the new anchor tenant has been tied to a long-term contract and the 30-year-old building is now nearly 97% leased or has returned to what it was when the colleague bought the property. Currently, the building has 11 tenants and a weighted average lease term of 8 years. This is an indicator of the remaining lease agreement for the tenant’s property.

The monetary terms of the HCSC transaction have not been disclosed, but leasing is likely to maintain or expand the operating profit of the building. According to Bloomberg data, the property generated nearly $ 8.9 million in net cash flow in 2021, according to data related to the owner’s $ 86 million loan to the property. Mortgages were packaged alongside other loans and sold to commercial mortgage-backed securities investors, making most of the building’s finances public.

Kore and Bentall Green Oak are renovating the 3500 Lacy Building on 20 acres of land next to Morton Arboretum. According to marketing leaflets, owners are spending about $ 4 million updating the lobby and fitness center of the building.

The building has a track record of rebounding from tenant departures dating back to 2012 when Salary moved the Hilshire brand spin-off from the building to the West Loop. The company used to occupy 80% of the building, but in just two years it returned to 86% for rent, with new tenants such as Havi Group, investment manager Invesco and sports nutrition company Globia Performance Nutrition.

Kore is confident in the office market outside Chicago, despite the pandemic headwinds. Last year, the company paid nearly $ 7 million to the Rosemont Corporate Center near O’Hare International Airport. This is an almost vacant property that we are confident we can rent.

Other investors have made big bets on the future after COVID in suburban offices.New York real estate company paid $ 190 million to 164 acres earlier this month Kemper Lakes Business Center On Lake Zurich, office properties on the outskirts of Chicago were paid the highest price in 17 years, while another New York investor recently paid $ 178 million. Corporate 500 Office Complex It is located in Deerfield, best known as the headquarters of Caterpillar. According to research firm MSCI Real Assets, the deal has only sold more than $ 160 million in multi-tenant suburban office properties in the region over the past five years.

Nevertheless, these sales have also ended. Financial difficulties For landlords of other suburban offices that have lost large tenants. Owners of the four Oak Brook office centers recently stopped paying monthly payments for the $ 24 million CMBS loan associated with the property after the largest tenant’s lease expired. According to Bloomberg data, owners of the Central Park of Lyle Complex have put about $ 94 million in CMBS loans on their overdue watchlist after the largest tenants have drained most of their space.

Cushman brokers Dan Deuter and Paul Lundstedt are selling the 3500 Lacey on behalf of Kore and Bentall Green Oak.

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