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Sale of Chicago's Second Biggest Office Tower in the Works
KBS Realty Advisors LLC of Newport Beach, CA has agreed to buy the 1.3-million-square-foot, 60-story, 95%-leased 300 North La Salle office tower from Houston, TX-based Hines Interests LP for $625 million or about $480 per square foot, according to ChicagoRealEstateDaily.com, owned by Crain's Chicago Business.
That would be the highest price per square foot ever paid for an office building in downtown Chicago, according to Crain's.
A California investor paid $422 a square foot in 2006 for 1 S. Dearborn St., another Hines development, according to real estate firm Jones Lang LaSalle Inc., which isn't involved in 300 N. LaSalle but is marketing the Mesirow building.
The total price is more than four times the $152-million total value of downtown office buildings sold since September 2008, Crain's states.
Charles J. Schreiber
Hines has been the developer, property manager and owner of 300 North LaSalle since it was built in phases from 2006 through 2009.
If the deal closes, it would be the biggest office tower transaction in Chicago since 2004 when Willis Tower, formerly known as the Sears Tower at 233 S. Wacker Drive, was sold for $840 million, according to Crain's.
As previously reported, Hines canceled plans for a $536-million downtown Chicago office tower when it couldn't obtain a construction loan.
Crain's states the KBS-Hines transaction is a sign that capital is starting to return to real estate markets, as pension funds and private-equity firms rebound from the recession.
For example, Mesirow Financial Holdings Inc. recently put its new office tower at 353 N. Clark St. up for sale. "Owners of some other trophy properties are likely to follow suit," Crain's states.
"The market is hungry for yield and quality," Donald Miller, CEO of suburban Atlanta-based Piedmont Office Realty Trust Inc., tells Crain's. Piedmont's portfolio includes 35 W. Wacker Drive and the Aon Center, overlooking Millennium Park.
Still, financing is available only for premium properties like 300 N. LaSalle, which is almost fully occupied by gilt-edged tenants under long-term leases, Crain's states.
"Thus, the deal is unlikely to signal a broad revival of investment in office buildings downtown, where the vacancy rate has reached its highest level in four years and rents are falling," the publication states.
"Prospective buyers have little interest in buildings where tenants can move out over the next few years.""If you have to lease it in the near term, the market is horrible," John Grissim, Midwest executive vice-president at developer Lincoln Property Co., told Crain's.
Kirkland & Ellis LLP, one of the largest law firms in the U.S., is the largest tenant at 300 North LaSalle, occupying about 650,000 square feet. The firm's lease runs to 2029.
Founded in 1992, KBS sponsors several investment vehicles, including two real estate investment trusts that have invested about $3.8 billion since 2006.
Crain's reports KBS has kept a low profile in the Chicago area. The California firm paid nearly $137 million in 2007 for the 647,200-square-foot Woodfield Preserve office complex in Schaumburg, where the current vacancy rate is about 25%.
Designed by the internationally recognized firm Pickard Chilton, 300 North LaSalle rises 775 feet from the Chicago River. It is among the city's tallest buildings and offers 200 feet of frontage along the river, including an outdoor plaza with seating and a large waterfront café.
Donald Miller
According to Hines' web site, as a pre-certified Gold LEED-CS development, the tower is extremely energy efficient. "Its façade is clad in richly articulated glass and stainless steel, maximizing the introduction of daylight and minimizing solar gain."
Located at the northwest corner of LaSalle Street and the Chicago River, 300 North LaSalle is near many of Chicago's finest restaurants, hotels and retailers.
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