Chicago-based real estate investment manager Heitman LLC has agreed to pay just over $700 million for a trophy tower in River North, in what would be one of the largest office deals in the city's history.
A Heitman fund has a preliminary deal to buy the 46-story tower at 353 N. Clark St. for nearly $600 per square foot, according to people familiar with the deal. If completed as expected, the sale of the nearly 1.2 million-square-foot tower will rank as the fourth-highest price paid for a Chicago office tower, and the second-highest per square foot.
The high-rise is a block east of the 60-story office tower at 300 N. LaSalle St., which sold in July for a city-record $850 million.
The price for 353 N. Clark St. is more than 80 percent higher than New York-based seller Tishman Speyer Properties L.P. paid four years ago, amid the recession. Tishman bought the building from a venture of Mesirow Financial, one of its developers, for $385 million in 2010.
A spokesman for Tishman and a spokeswoman for Heitman declined to comment. Bruce Miller, a managing director at Chicago-based Jones Lang LaSalle Inc. who is brokering the sale, did not return calls.
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As office building prices have risen, investment returns have fallen. In six major metro markets including Chicago, first-year rates of return for buyers of trophy towers fell to 4.1 percent during the third quarter, the lowest ever recorded, according to Real Capital Analytics. But Chicago has remained a bargain on price per square foot when compared with the hottest coastal markets.
“Over the past two years we've seen much of the action move to places like Chicago, Seattle, Austin and Denver,” said Ben Thypin, director of market analysis at Real Capital Analytics. “Pricing has become so crazy in New York and San Francisco, you can get a higher return for a similar amount of risk in a place like Chicago. Chicago seems to have more room to run yield-wise.”
Read More: http://www.chicagobusiness.com/realestate/20141111/CRED03/141119938/river-north-office-tower-selling-for-700-million
Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.