Zell REIT Quietly Showing Chicago Offices
Sam Zell’s Equity Commonwealth is selectively marketing a Chicago office building valued at about $500 million.
The 1.6 million-square-foot property, at 600 West Chicago Avenue in the River North submarket, is nearly fully occupied.
The REIT has been actively realigning its portfolio and strategy, resulting in $4.9 billion of sales since 2014. That activity has reduced the company’s portfolio to 20 properties totaling 11 million sf, from 156 properties totaling 43 million sf, and has freed up $2.5 billion of cash for potential investments.
The company has listed 600 West Chicago Avenue with Eastdil Secured, which is pitching it to a handful of investors.
The occupancy rate is 98%. Groupon is headquartered in the building, which has become a hub for technology-related firms. Groupon renewed and expanded its lease in 2015, increasing its footprint to 376,000 sf, or almost one-quarter of the space. Others tenants include Big Ten Networks, Echo Global, TD Ameritrade and WM Wrigley Jr. Co.
The occupancy rate exceeds the 95% average for the red-hot River North submarket. Demand from technology tenants has boosted leasing in the market over the past several years.
The eight-story building is along the North Branch of the Chicago River. It was completed in 1908 as the Montgomery Ward catalogue distribution center and was later converted to offices. A renovation in 2001 updated the space to attract technology tenants.
The building sits atop a multi-story garage with almost 1,500 spaces. Equity Commonwealth secured approvals last year to convert one story of the garage into 63,000 sf of office space geared toward tech firms. It’s unclear if the REIT has secured tenants for the additional space, which is scheduled to be completed by yearend.
The building includes a 30,000-sf gym, a day spa and a mix of shops and restaurants in about 85,000 sf of retail space. Shuttles run to the city’s major transportation hubs, including Ogilvie Transportation Center and Union Station.
Equity Commonwealth acquired the building in 2011 for $390 million from a joint venture that included investor Victor Gerstein. At the time, the company operated as CommonWealth REIT and was based in Newton, Mass. A shareholder revolt in 2014 ended when a group led by Zell and David Helfand took control. The Zell group renamed the company, moved its headquarters to Chicago and began aggressively repositioning the portfolio.