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player ready...A suburban Detroit development firm is negotiating to buy 250 S. Wacker Drive, a financially troubled office building in a high-profile location.
Real Estate Development and Investment Co., or Redico, would pay nearly $19 million for the 16-story building, developed in 1958, sources said. The 236,400-square-foot structure is only 68.5 percent leased, according to real estate research firm CoStar Group.
Executives with Southfield, Mich.-based Redico declined to comment.
The building’s owner, a partnership that includes real estate executive Scott Toberman, defaulted on a $16.3 million loan due April 1, 2003, records show. Wells Fargo Bank, the trustee for the mortgage holders, has agreed to a series of six-month extensions.
Chicago-based real estate firm Jones Lang LaSalle Inc., which represents the partnership, declined to comment
Toberman, president of Chicago-based European American Realty Ltd., couldn’t be reached for comment.
Seyfarth searching: Chicago law firm Seyfarth Shaw, which has been mulling options in the downtown office market, has hired a real estate adviser, Jones Lang LaSalle, sources said. J. Stephen Poor, a Seyfarth partner, could not be reached for comment. The firm has 221,000 square feet of space at 55 E. Monroe St. under a lease that expires in 2006.
TA in 2 deals: TA Associates Realty made two suburban deals last month, sources said.
In one deal, the Boston-based pension fund adviser sold a nearly 99,000-square-foot office building at 1100 Lake Cook Rd. in Buffalo Grove that is under a long-term lease to FedEx Corp. The buyer, Indianapolis-based investment firm HDG Mansur Group, paid almost $19 million, or about $190 a square foot, sources said.
Rosemont-based Colliers Bennett & Kahnweiler Inc. represented TA in both deals.
TA also purchased two industrial buildings from New York Life Insurance Co., confirmed Jeffrey Fischer, first vice president with CB Richard Ellis Inc., which advised the insurer.
The deal included a mostly vacant building at 340 Remington Rd. in Bolingbrook and a structure in Itasca fully leased to Wood Dale-based printer Madden Communications Inc. The price was $18.5 million, sources said.
Space in Des Plaines: Space Center Inc. last month bought a 170,000-square-foot industrial building at 901 Oakton St. in Des Plaines, said Thomas Casey, vice president in the local office of the St. Paul-based real estate investment firm.
The seller was a fund managed by Horrigan Advisors Inc. of Oak Brook and Darwin Realty & Development Corp. of Elmhurst.
The single tenant, York, Pa.-based Denstply International Inc., a dental products and equipment manufacturer, has a lease until 2011. The investment of more than $9 million is projected to have a capitalization rate, or return, of nearly 9.4 percent, sources said.
More vacancies: The vacancy rate in the downtown office market shot up in the fourth quarter to 15.1 percent from 13.2 percent in the third quarter, according to a market survey by Jones Lang LaSalle.
Demand for space, as measured by net absorption, fell nearly 1.4 million square feet during the quarter, as downtown businesses continue to contract. Overall demand declined even though demand for newer, so-called Class A, space rose by nearly 1 million square feet of space.
“The message is pretty clear: Newer and better buildings will continue to absorb, but you’re going to be taking a big hit on the older Class B stock,” said Stephen Smith, managing director with Jones Lang LaSalle.
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Business contraction brings soaring vacancies
The downtown office vacancy rate rose sharply during the fourth quarter, to 15.1 percent, as downtown businesses continue to contract. Pushing up the vacancy rate is empty space left behind by Bank One, which is combining offices into Bank One Center. The quarter also marked the opening of ABN Amro Plaza, where LaSalle Bank’s parent is consolidating offices. But space to be vacated as a result of that move is not yet included in the survey.
%%
Vacancy Rates Demand for Space*
SUBMARKET 3rd Q 4th Q 3rd Q 4th Q
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Central Loop 15.7% 16.8% 44,104 -261,505
East Loop 13.4% 16.1% 14,153 -658,294
LaSalle Street 11.1% 11.2% 67,815 -1,527
North Michigan 8.9% 10.5% -46,614 -230,525
River North 19.2% 18.9% -111,830 34,286
South Loop 6.2% 7.1% 5,871 -16,334
West Loop 12.5% 15.9% -34,723 -245,627
Market total 13.2% 15.1% -61,224 -1,379,526
%% *As measured by net absorption, the change in the amount of leased and occupied space, compared to the prior period.
Source: Jones Lang LaSalle Inc.