A sign that office building prices in the Loop may be getting a bit toppy is the withdrawal–at least for the moment–of TrizecHahn Office Properties from the bidding for One IBM Plaza and the 225 N. Michigan Ave. building in Illinois Center.
The office subsidiary of Toronto-based property giant TrizecHahn Corp. at one time headed the list of potential buyers.
But Casey Wold, president of TrizecHahn Office, said the price being asked by Blackstone Group, the powerhouse New York investment firm that bought the properties before the market suddenly shot up over the last year, is too high.
The office building investment boom has resulted in a flood of properties on the market by owners seeking to cash in at the peak, Wold noted.
“There’s so much property that’s on the market, you simply have to be selective on the ones that you like in terms of market niche together with pricing,” he added.
“Prices have been getting frothy,” he said. “We have maintained financial discipline.”
Meanwhile, Blackstone as a buyer rather than seller has yet to nail down a deal for the Amoco Building at 200 E. Randolph St. that it has reportedly been working on for several months.
Maybe Amoco Corp. is asking too much as well.
Branching out: Chicago’s Northern Realty Group Ltd., a small but successful firm that up to now has specialized in providing retail-related real estate services, is starting to branch out.
The company is leading an investment group that acquired the Lake Club, a 168-unit garden apartment complex in Mt. Prospect, and is participating with Mesirow Stein Real Estate Inc. in developing a retail-residential-office development in downtown Deerfield.
Northern President Bruce Kaplan said he believes the company can find opportunities in individual investment and development deals without taking away from its main focus of retail leasing, consulting and tenant representation.
The Mt. Prospect complex, which the Northern group bought from Chicago’s St. John Partnership, is a run-down property that has suffered from deferred maintenance, Kaplan said. Northern plans to spend $1 million fixing it up.
“It has `good bones,’ but it’s not of interest to many buyers paying a high price for newer properties that they can operate as-is,” said Michael Tobin, Northern’s new managing director of development, who joined the firm to lead the new ventures.
Tobin added that the value of existing rental properties is enhanced in the Cook County suburbs because restrictive zoning and high property taxes create big barriers to building new apartment complexes there.
Kaplan said Northern also plans to do more joint ventures with big developers like Mesirow Stein in projects to help revamp city neighborhood shopping areas and suburban downtowns. Northern teamed with John Buck Co. to bid on the big retail-hotel-entertainment project in downtown Evanston Research Park, but lost out to Arthur Hill & Co.
Both the apartment investment and commercial redevelopment projects “require a creative eye to figure out,” Kaplan said.
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These days, everybody wants to be creative.
All you need: Leases tell stories.
Heilig-Meyers (H.M.Y. Room Store Inc.) has leased a 335,000-square-foot warehouse and distribution facility at Elk Trail Center in Carol Stream.
The home furnishings chain, which recently acquired John M. Smith Homemakers, is centralizing warehousing for Chicago-area stores (and will also have a discount retail center for “gently damaged” goods.)
Not far away, mattress retailer Bedding Experts is moving to a 52,000-square-foot warehouse in Carol Stream, expanding almost threefold from its old quarters in Elmhurst in order to serve its 13 retail stores in the area.
And Domino’s Pizza is relocating a dough processing and distribution plant to a newly constructed speculative facility at Internationale Centre in Woodridge, moving from Aurora. Domino’s will produce fresh dough there for daily shipment to its retail stores.
All of which underscores the relentless suburban housing boom. For what do people do when they buy a new house? They furnish it, order out for pizza and then go to bed.