Seems like every property owner is “evaluating options” these days. In other words, they’ve got the itch to sell in a hot market.
One owner of some major Chicago buildings that’s in evaluation mode is New York’s Blackstone Investment Group, which bought the 225 N. Michigan Ave. building in Illinois Center and One IBM Plaza for bargain prices a couple of years ago when the market was going nowhere.
That gives Blackstone some big profit potential. For instance, the reported price for the 1.4-million-square-foot IBM building was less than $100 a square foot; now, prestigious office towers downtown are being marketed for double that rate.
Blackstone’s real estate partnership, which owns about 14 million square feet of commercial property–mostly office buildings–in the United States and Europe, also bought the Swissotel Chicago at 323 E. Wacker Drive along with three other U.S. Swissotels last July.
With the Chicago hotel market possibly even more bubbly than the office market, the 630-room Swissotel, rated among the city’s best, might be an appealing prize for one of the big players in the rapidly consolidating hotel
business.
A source close to Blackstone said the investment powerhouse, founded by Nixon administration Commerce Secretary Peter Peterson, has hired consultants to explore “the best way of maximizing value over the next couple of years.”
Blackstone also owns a stake in Prime Group Realty Trust, a Chicago real estate investment trust that concentrates on Chicago-area office buildings. That brings up the interesting possibility of Prime itself acquiring one or both of the office properties.
Potential energy: Prime, which has been very active since it went public late last year, has one of the 11 potential development sites for downtown office buildings listed on a map being circulated by the Chicago office of the Insignia/ESG commercial real estate services firm to some of its clients.
Actual development plans have been floated for at least six of the sites, including the Prime property at 320 N. LaSalle St., for which preliminary designs have been drawn up for a 50-story office tower.
Six of the sites are along Wacker Drive, pointed out Goldie Wolfe, executive managing director of Insignia/ESG’s Chicago office, highlighting the importance of that artery–which is scheduled for a $350 million, three-year renovation if federal funds are forthcoming.
One can only imagine the chaos if all six of those office buildings are being constructed at the same time Wacker Drive is being torn apart.
That’s not very likely, however. The sites are listed only for their potential, and the developers at this point are rattling their sabers rather than shoveling their dirt.
Scott Brandwein, Insignia/ESG’s Midwest president, said the map is used to suggest to big tenants what their options for the future might be.
“It’s our job to interpret which developments are more likely,” he said. “What gets built when will impact what tenants will be moving, and how that frees up space for other tenants.”
Of course, if construction does start at all or most of the sites, that will inject new space that could potentially reverse the current trend of declining vacancies and rising rents, which would in turn affect how he and his colleagues advise tenants, lenders, developers and investors, Brandwein added.
“It’s a gigantic jigsaw puzzle,” he said.
Busting out: The expansion of the Chicago area’s industrial real estate might–it already outstrips any other market with more than 900 million square feet of space– continues to press outward.
Industrial Developments International has leased its first, 258,000-square-foot, building at Rock Run Business Park in Joliet to San Diego-based Petco Animal Supplies Inc., a nationwide retailer of pet-care products, in a deal brokered by Cushman & Wakefield. The property will be Petco’s Midwest distribution center, employing 100 people.
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The developer is following up the success with construction this spring of a similar, 261,000-square-foot building–expandable to 467,000 square feet–at Rock Run.
The 380-acre industrial park is being developed with the strong backing of the City of Joliet and with help from the Illinois Department of Transportation, which has agreed to build an Interstate Highway 80 interchange adjacent to Rock Run.
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