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REA
February 26, 2020  

Recap or Sale Eyed for Chicago Skyscraper

A Chicago office trophy worth an estimated $900 million is coming into play.

The 1.2 million-square-foot skyscraper, at 150 North Riverside Plaza, was completed three years ago by a joint venture between Riverside Investment & Development and Wanxiang America Real Estate. The partnership has tapped JLL to explore a recapitalization. The preference is to sell a 49% interest, but other offers, including for the entire property, would be considered.

A sale at the estimated valuation of $750/sf would be among the priciest ever in Chicago on a per-foot basis. The listing will test investor appetite for large trades following a year of declining sales in Chicago. Large office sales tumbled 61% last year to $1.5 billion, due largely to investor concerns about a potential increase in property taxes and the impact of a heavy construction pipeline on leasing.

However, buyers are still showing up for new, high-quality properties with stabilized rent rolls. The building at 150 North Riverside checks those boxes. It was virtually fully leased as of late 2018, when the ownership group refinanced it with a $470 million loan from Pacific Life. Large tenants include investment firm Holland & Knight, Hyatt Hotels, Navigant Consulting and William Blair & Co.

The 54-story tower is one of the more distinctive properties in Chicago. It is sometimes referred to as “The Tuning Fork” due to its cantilevered structure atop a narrow base, which allows much of its two-acre site to be used as open space. The building has a 100-foot-tall glass-enclosed lobby with a digital art installation, an 8,600-sf high-end fitness center, conference facilities and an indoor/outdoor tenant lounge.

The property is on the west bank of the Chicago River, at the confluence of its three branches. It’s between West Randolph Street and West Lake Street, in an area dense with shops, restaurants and hotels. The Ogilvie Transportation Center is a couple of blocks away.

The surrounding West Loop submarket has 37.9 million sf of Class-A space, which was 91% leased at yearend. Overall, the West Loop saw some 1.3 million sf of new leases last year, amounting to 48% of all absorption in downtown Chicago, according to JLL. Demand for high-quality space from technology and other tenants has continued to push up asking rents for new Class-A space — a trend that is expected to continue this year.

The record per-foot price for a Chicago office property is $774/sf, according to Real Estate Alert’s Deal Database. That was set by last year’s sale of a relatively small property — the 65,000-sf building at 811 West Fulton Market. Intercontinental Real Estate paid $50.3 million to local developer Shapack Partners for the property, with JLL brokering the deal. There has never been a larger Chicago office transaction that cracked the $700/sf level.

Wanxiang America, based in Elgin, Ill., is the U.S. property arm of Chinese auto-parts manufacturer Wanxiang Group. MetLife holds a $210 million preferred-equity interest in 150 North Riverside Plaza.