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Even though it's one of the oldest interior contracting companies in Chicagoland, J.C. Anderson is seeing unprecedented competition. The firm, which started as a plastering business in 1879, has found its niche in education, office, and light industrial interiors, but is looking to diversify as the number of contractors competing grows.
J.C. Anderson's Clint Hickman and Thomas Bean showed us around their Elmhurst office, complete with warehouse and basketball court, on Tuesday afternoon. Tom says projects that usually have just five bidders are reaching a dozen and he's even seen larger downtown projects with 26 different contractors bidding on the build-out. The contractor recently won a 48k SF assignment for the new TreeHouse Foods HQ in Oak Brook and a 60k SF space for the Dental Network of America.
We snapped Kevin Radoha in the JC Anderson Boardroom with Clint and Tom. J.C. Anderson's 150 project managers and tradesmen complete about 2M SF of buildouts each year, accounting for about $100M in volume. It often performs work with DePaul University. With so much competition, J.C. Anderson is keeping prices down through "estimating right the first time" and getting all of its materials ordered and employees ready to go before starting a project so that it's done on time. Its goals coming out of the recession? Get into diversified projects like healthcare and some more industrial.
Now and Then
During the Great Depression, downtown Chicago office occupancy fell from 87% to 55% (so quit your belly-achin', you young'uns), says architectural historian Jean Guarino. She headlined a lunchtime lecture at the Chicago Architecture Foundation yesterday. As a result, the Federal Housing Association issued $50k loans to several buildings to modernize and attract new tenants. Such modernizations increased the popularity of doors instead of grilles on elevator fronts, rubber tile office floors, and even full-length toilet stall dividers. Some of these renovations, like the lobby at the Rookery building are still intact.
Today, Jean says, some buildings are taking a page out of that same book. 190 S. LaSalle, for example, had a large increase in vacancy when Mayer Brown left in the late '90s. Building management replaced some of the space with a swanky exclusive lounge called The Library for its tenants, to keep up with competition in the new Wacker Drive skyscrapers. One trend that hasn't picked up again in the Great Recession: Demolition. More than 120 buildings in the Chicago area were torn down in the 1930s to make way for parking garages and two-story, tax-payer buildings to fill the economic void. Also missing: the catchy tunes.
RETAIL DEAL VOLUME HEATS UP
At the end of August, retail transaction volume in Chicago reached $587M—comfortably ahead of last year’s pace ($487M) and in keeping with national trends. Earlier in the year, as well as during the latter part of 2009, the majority of deals consisted of smaller properties leased primarily to national tenants (e.g., Office Depot, Walgreens, La-Z Boy) as well as a number of shopping centers priced between $5M to $15M. Since mid-June, however, three shopping centers have traded north of $15M. Including the nearly fully leased Springbrook Prairie Pavilion in Naperville, a 228k SF shopping center that’s currently occupied by a number of strong national tenants (e.g., Whole Foods, Nordstrom, Cost Plus World Market). The Bond Cos., MDC Properties, and Midwest Commercial Realty sold the property to New Tower Trust Co. in July for $69M , or a stunning $302/SF, well above the current market average of $162/SF.
Foreign Policy Magazine recently compiled its Global Cities Index 2010 and Chicago ranked 6th among world competition.
Not bad for a Midwestern city that rests in the Heartland of America. The magazine cited that more than one-third of the city’s population speaks a language other than English.
To create the list, the firm “analyzed 65 cities with more than 1 million people across every region of the globe, using definitive sources to tally everything from a city’s business activity, human capital, and information exchange to its cultural experience and political engagement.”
The magazine measured every thing from a city’s number of museums and embassies, to how many Fortune 500 companies headquarter there and the flow of goods through airports and ports.
With that kind of criteria, it’s no wonder why Chicago scored so high. The majority of the country’s rail traffic still makes its way through Chicago and O’Hare airport is consistently ranked as one of the world’s busiest. The city is also known for its world class museums and eight Fortune 500 companies reside in Chicago (a total of 27 make their home in the Chicago metropolitan area).
The United States placed strongly in the top 10, with New York, Chicago and Los Angeles all making the cut, but the trend was the growth of the Asian Pacific Market, which placed five cities–Tokyo, Hong Kong, Singapore, Sydney, and Seoul.
The magazine believes that this will be a continuing trend “there’s no question which way the momentum is headed: Just as more people will continue to migrate from farms to cities, more global clout will move from West to East.”
A highly unusual intervention by U.S. Rep. Jan Schakowsky stopped foreclosure proceedings against a group of North Side business owners who owe tens of millions to a failed suburban bank.
Ms. Schakowsky, D-Chicago, in September held two town-hall meetings with aggrieved business customers of failed Mutual Bank of Harvey—at the behest of Balvinder Singh, one of the borrowers and a contributor to Democratic politicians, including Ms. Schakowsky. The borrowers complained that Garland, Texas-based United Central Bank, which bought Mutual’s assets and deposits from the Federal Deposit Insurance Corp. last year, was heavy-handed and aggressive in foreclosing on them.
At the second meeting, on Sept. 19, United CEO Luke Lively pledged to halt all foreclosures, giving hope to stressed borrowers in the largely Indian-American business strip along Devon Avenue. He says his bank now is in negotiations with about 20 local borrowers with a total of about $77 million in loans.
While politicians often complain to the country’s largest banks about aggressive foreclosure policies toward homeowners who can’t pay their mortgages, bank industry observers say intervention on behalf of a group of business borrowers of a failed bank is very rare. Ms. Schakowsky’s quick success is bound to encourage other businesses whose bad loans helped sink their banks to ask members of Congress for help.
“They’re going to come in and say, ‘Hey, what about me?’” says Bert Ely, a Virginia-based consultant to banks.
In an interview, Ms. Schakowsky says she was concerned that Devon Avenue “essentially would go dark. . . .If there are communities that are (in danger of being) decimated, I assure you that any member of Congress would do everything they could to deal with the devastation of foreclosures.”
“I feel very proud of this,” she says, adding that Mr. Singh’s contributions had nothing to do with her decision to help. “It was clear to me there was a widespread problem,” she says.
For his part, Mr. Singh, who gave more than $30,000 to local Democratic politicians in the most recent presidential cycle and $2,000 to Ms. Schakowsky’s campaign in 2006, says he owns property on North Clark Street with a $5.6 million loan from Mutual Bank. He says United Central had rebuffed his attempts to ease the terms of his loan as he rounded up potential new tenants at his property, prompting him to spur the action from the tight-knit Indian-American business community in Chicago.
“They were not negotiating with anybody,” he says. “They wanted to foreclose on everybody.”
United CEO Mr. Lively, a veteran of the bank who took over the top job in late May, says the complaints from the community made him aware of a faction within his loan-workout group who weren’t treating customers properly. He says Ms. Schakowsky acted appropriately, and the bank would have taken the same action once it was aware of the problem without pressure from lawmakers.
“We did not come to Chicago to pillage the portfolio,” he says.
But, he adds, some of the borrowers were under the mistaken impression that United Central would drastically reduce the principal on their loans. That’s not the case: The bank, which has an arrangement with the FDIC in which it shoulders 20% of the losses on the loan portfolio, is lengthening loan durations and reducing interest, but isn’t taking hits on the principal.
“Our goal is not to give away taxpayer-supported money,” he says.
Before it failed, in the summer of 2009, Mutual Bank of Harvey was a $1.7 billion-asset bank owned by a wealthy Indian-American businessman from California. It was best-known for former CEO Amrish Mahajan’s role as a major fundraiser for indicted former Gov. Rod Blagojevich.
It also played a role in then-U.S. Sen. Barack Obama’s stickiest ethics situation: It financed the purchase of a lot next to the Obama family’s Kenwood mansion by the wife of Blagojevich fundraiser Tony Rezko, who now is a convicted felon. The Obamas purchased a sliver of that lot from Mrs. Rezko in 2005 to widen their yard, an arrangement Mr. Obama later called a mistake.
Demand for office space is still weak, but the downtown market has benefited from a few significant transactions in the past year, said a panel of experts at a ULI forum focusing on the Chicago office market.
“Downtown is benefiting from the little demand that there is right now,” said Jack F. McKinney, president, J.F. McKinney & Associates.
McKinney cited the leases of United Airlines and BP as major tenants moving from the suburbs to the CBD. Corporate users are concerned about attracting young talent, and one of the best ways to do that is to move downtown, where most young professionals want to live.
While this trend has been prevalent for some time, McKinney remembers a time when it was different. Yet he wondered if the changing of the guard in Chicago–with the decision by Mayor Daley to not seek reelection–will have an effect on major firms moving to the city.
“In the 1980s it was a flight to the suburbs,” said McKinney. “That changed the past 20 years as firms have been moving downtown. I’m curious as to what will happen when Mayor Daley is no longer here.”
McKinney said that he is seeing “green shoots” in suburban leasing, but he compared the overall environment to the NFC North football division, with financing still difficult to achieve negotiations are often “three yards and a cloud of dust.”
The investment environment is considerably more active in 2010 than it was in 2009, but compared to the boom years in 2006 and 2007, it is still relatively paltry. Yet there have been some record deals in the market, with 300 N. LaSalle selling for the highest per-square-foot price in the city’s history.
It lends to a trend that is currently taking place in the office investment market. Buyers want quality, well-leased assets, with little risk of tenant turnover.
“The sales we are seeing are of newer towers with long leases and good credit tenants,” said James Postweiler, managing director for Jones Lang LaSalle.
Tishman Speyer’s Casey Wold said that leases drive investment activity in this market. This trend could change the way that many landlords approach leases. If they are looking to sell a property, short-term leases will not be as appetizing.
“The new way to sell real estate is with leases,” said Wold. “A five-to-ten year lease is a waste of a landlord’s time.”
Wold said that commercial real estate is a long-term investment now, as opposed to the rapid buying and selling of the previous few years. With interest rates low, quality property will outperform treasuries over the long haul.
Yet it is difficult to find quality firms willing to take a 20-year-lease and Wold acknowledged that landlords probably shouldn’t pass on the opportunity to rent space, even if it is with a short-term lease.
However, Postweiler sees investors more willing to take on some leasing risk in this environment.
“Some buyers may take some (leasing risk) if they believe the worst is over,” said Postweiler. “This would not have happened last year, but we see some of this activity this year. It really depends on the building.”
Wold is a believer that the worst is over and that eventually rents and absorption will begin to increase.
“As long as we continue to plod along, rents will creep up,” said Wold. “Markets have a way of morphing together. I think we will see that in the next 18 months.”
We did two things yesterday: 1) Visit ULI's breakfast on Downtown vs. The Suburbs at the Union League Club, and 2) rented the Hanks flick The Burbs. One taught us that investment is still trending toward urban core, well-leased buildings, but great opportunities exist in buying and turning around empty buildings. The other taught us to love Carrie Fisher again. Can you guess which was which?
Tishman Speyer's Casey Wold and JLL's James Postweiler (above) joined JF McKinney's Jack McKinney Jr. and BPG Properties' Joe Neverauskus for the panel. Casey says he sees each building's rent roll as a series of bonds, and he tried to balance the rolls by giving the best and longest-term tenants the best space. Having a few short-term or low-credit tenants in hard-to-fill spaces is better than nothing at all. James, who works on underwriting, says lenders are hesitant about seeing rent rolls full of leases with termination agreements. Jack says there are lots of cheap spaces available in the suburbs for under $50/SF, which means some risk for investors in that the properties may not lease up, but also could be a great opportunity for improvement and cash flow.
Charter One's George Hauch said his bank is also hesitant on loans without a lot of long-term lease tenants on the building. Hines' David Bach says his company is starting to expand outside of its core product, looking into smaller buildings with one of its latest funds. Kensington Advisors' Mark Hahn says now is a great time to be selling apartment buildings, as many of his companies suburban complexes are well-leased and investors are showing interest again.
Bovis Lend Lease's Elizabeth Snell and JMB Financial's John Howley say the best opportunities right now are in smaller and off-beat projects. Elizabeth's firm is working on renovations at Jones College Prep in the South Loop and an MOB at Northwestern Memorial Hospital. JMB worked on putting together financing for the new casino under development in Des Plaines.
We snapped VOA's Jeannette Lenear, City of Hope's Sarah Ann Maraccini, and JLL's Dan Ryan making some big plans. Sarah Ann is organizing the Spirit of Hope Dinner Nov. 3, which will honor Dan for his achievements in real estate and public service.
SLOW AND STEADY
That's how the Federal Reserve Bank's Bill Strauss said the US economy would proceed out of the recession at the SIOR Luncheon yesterday at the Rosewood. Individuals and businesses still have little taste for debt obligation he said, but domestic GDP growth is approaching 5%. The one downfall is still exports, which are lagging imports significantly. Bill says this is unlikely to have a long-term effect, as it mirrors how we come out of most recessions.
Northern Builders' Thomas Kenrich and Robert Tuerk, flanking Opus North's Mike Yungerman, are proud of their company's new scholarship program, helping young professional attend Roosevelt Unversity for a commercial real estate degree. Both Opus and Northern are looking for new projects.
VOTE FOR COMMISH
Downtown Real Estate Softball League may be over, but voting for Chicago's 16-inch Softball Hall of Fame has just begun. DRESL Commissioner Newmark Knight Frank's Richie Klein (right) has been nominated for Best League Organizer. Cast your vote here.
Chicago's downtown office vacancy rate decreased for the first time in almost two years, but plenty of empty space is still available. Crain's Lisa Leiter talks with John Dempsey of CB Richard Ellis about what lies ahead for workspace in the city:
HR 5297 doesn't quite have the ring of "Obamacare" or "DREAM Act" but, it's still meaty legislation. President Obama signed it yesterday, and the small business specialists at SomerCor504 tell us the $30B Small Business Lending Fund (established by the bill) will provide cheap capital to community banks, encouraging lending to small businesses.
SomerCor504's Gabe Beukinga and David Frank told us HR 5297 includes $505M for fee reduction. This will waive the majority of fees associated with the program through 2010 or until the fees are exhausted. It also (for the first time) allows small business owners to refinance the debt on commercial buildings and equipment via the 504 program. The max SBA loan has also been increased to $5M (or $5.5M for buildings meeting certain energy efficiency standards) from $1.5M to $2M, so SomerCor can provide financing on buildings costing as much as $15M, as long as they're at least 51% owner-occupied. David says he's already seen signs of life in the small business loan industry and expects these new regulations will encourage even more small businesses to buy their own buildings.
SomerCor provides about $85M in loans per year now, but expects to be able to increase that 30% to 50% over the next year. Gabe says the 20-year fixed rate of about 4.75% and 90% LTV is a major draw for brokers looking to get their deals closed since very few banks are fixing rates that low. With financing from many other sources dried up, brokers are finding the 504 program a cheap financing option for clients. Gabe and David are anticipating many companies will also take advantage of the refinance option, which should save companies on interest expenses, hopefully leading to more jobs.
SENIORS HOUSING ROLLER COASTER
Moody's chief economist Mark Zandi offered good news and, you guessed it—bad news—at the National Investment Council's 20th annual conference in Chicago last week. Investors were happy to hear that the largest single-year age group is now 50-years-old, meaning potentially more profits for seniors housing, but disappointed that employment isn't growing quickly enough to sustain a continued drop in unemployment. And no, Mark isn't showing us the size of the fish he caught last weekend. He's explaining how small businesses account for about half of employment growth and two-thirds of business growth in the country, and currently they don't have enough money for capital improvements. As the stimulus package wears off and policy uncertainty increases, businesses will still be hesitant about hiring, he said during Thursday's breakfast at the Sheraton. Americans will be uncomfortable with economic growth for another six to 12 months, he predicts, until the employment spigot turns back on around August 2011.
At lunch, Newt Gingrich explained that the recent passage of the healthcare bill could be moot if legislators start trying to get parts of it line-item vetoed over the course of the next four years before it goes into effect, especially with an expected influx of Republicans in the legislature at the mid-term elections. He anticipates that in the future, efficiencies in healthcare overseas, such as the ability to get the same surgery for a fraction of the price, will cut into US healthcare profits.
We snapped some real live investors at the conference: Focus Healthcare Partners' Curt Schaller, Kensington Advisors' Jim Smith, and Philip Van Syckle. Curt's company recently bought the distressed debt on a property in Philadelphia, which he says has consistently had a good market for seniors housing, as well as a few busted condo projects. Kensington is still looking for the perfect deal, Jim says.
Pathways Senior Living's Aaron D'Costa and Quadrangle Partners' Aaron Osmundson were looking to start working together at the conference. Pathways is already under construction on a new seniors living facility in Vernon Hills.
W. Clement Stone, apostle of the "positive mental attitude," always had a thing for Uptown. He chose to build his business in the Chicago neighborhood, not far from where he went to high school, and put hundreds of jobs there.
All of them are gone now, and the buildings Stone's former empire left behind are being sold in an auction. The properties are a large and incongruous part of the neighborhood. Amid a low-rise jumble that includes the Vietnamese restaurants along Argyle stands the former home of Stone's Combined Insurance Co. of America at 5050 N. Broadway.
It seems to belong out on some tollway, but instead it sits close by blocks that concentrate the charms and the perils of urban life. The main building's 303,000 square feet are empty.
Stone died in 2002 at age 100, his Combined Insurance having become the basis for Aon Corp. Aon sold Combined in 2007 to ACE Ltd. of Bermuda, which kept the insurance company's jobs in Chicago but decided downtown was a better place for them.
ACE has hired Jones Lang LaSalle Inc. to sell the Combined properties. Included in the package are a six-level parking garage for more than 600 cars at 5051 N. Broadway, a small storage building at 5035 N. Broadway, and a couple of parking lots.
They are being sold online as a package via Auction.com until noon Thursday, with a suggested starting bid of $2.9 million.
Eric Kunkel, executive vice president at Jones Lang, said his company has been marketing the properties for about a year and a half and had one sales agreement on which the buyer could not close. He said several parties have looked at the parcels for uses such as offices, schools and senior housing.
The main building architecture might have been chic in 1960. It ranges from six to 10 stories and was built in stages between 1920 and 1972, Kunkel said. The look needs updating, but Kunkel said all the properties have been well-maintained. The buyer will get a site with lots of employee parking and easy access to the CTA Red Line. Maybe inside those walls will be a few positive mental vibes from the magnate who once ruled there.
OFFICE IMPROVEMENT: Nobody will be throwing a party just yet, but the third-quarter statistics for the Chicago area's office market show tentative signs of an improving economy. Jones Lang LaSalle Inc. said the downtown vacancy rate at the quarter's end was 13.8 percent, same as the second quarter, and that the suburban vacancy rate was 21.7 percent, down from 22 percent last quarter.
The suburbs broke a losing streak. Rena Christofidis, research director at Jones Lang, said the suburban vacancy rate had risen for 14 straight quarters until this one. The city rate had risen for six straight quarters until mid-2010, she said. Average rents in the city are reported to be steady while they're slipping in the suburbs. Few deals are getting signed, but office brokers agree that more companies are at least checking out new space.
ON THE MOVE: Paul O'Connor, the onetime executive director of World Business Chicago who most recently worked on the cen- tennial of the Burnham Plan for the nonprofit Metropolis 2020, is joining the Chicago architectural firm Skidmore, Owings & Merrill LLP. He will be part of the city design practice headed by Phillip Enquist. O'Connor said Skidmore, which handles a lot of international business out of Chicago, is committed to being "more active and visible" in its hometown. He'll start his job Nov. 1.
SNUFFED OUT: Two weeks ago, I reported on the building at 1418 N. Lake Shore Drive, which thought it enacted the area's first smoking ban that forbids residents to smoke in their homes. It may be the first high-rise here to ban smoking, but alert reader Peter Fogarty notified me that his 12-unit building in the 4600 block of North Campbell did exactly that in the spring of 2007.
CALENDAR NOTE: Roosevelt University's real estate school hosts a luncheon Tuesday featuring female leaders in real estate discussing how to get ahead. It's one of several programs supported by Goldie Wolfe Miller. It'll be at the Chicago Club, 81 E. Van Buren and features an all-star list of panelists. Details: roosevelt .edu/realestate/goldie.
The US GSA and 4240 Architecture are renovating the former Bond Department Store at State and Jackson. 4240 has designed a historically sensitive and high-performance facade along the main elevation at State and Jackson.
4240 design director Robert Benson is designing the building to let a lot of light in. The top three floors, which will include new glazing along the North and West façades, will house the Dept. of Labor. Other major modifications include new lobby and loading facilities. The Architecture of Recovery – Chicago State Street South project is designed to conserve resources and meet the high-performance goals of the American Recovery and Reinvestment Act, LEED, and the GSA. Completion is slated for early 2012.
Jack Reardon has joined NAI Hiffman as an SVP with their office services group. Jack’s focus will be on Chicago’s North, Northwest, and O’Hare submarkets. He was formerly with CB Richard Ellis, and most recently, Cushman & Wakefield. Earlier this year he brokered leases for Career Education Corp., FDIC, and StoneWater Capital totaling 570k SF. Jack graduated from Miami University, Ohio.
Grady Hamilton has joined Trammell Crow Co. as principal. He will be responsible for industrial and office development and acquisitions throughout the Chicago suburban market, expanding Trammell Crow’s land control throughout the Chicago suburbs and new business development in Minneapolis. Grady previously worked Opus North where he was responsible for managing the firm’s office development and leasing strategies in the Chicago market. He graduated from Miami University.
Jones Lang LaSalle has promoted nine Chicago-based executives in its brokerage, corporate solutions, and business & economic incentives practices:
Joe Brady to managing director, co-lead in corporate retail solutions
Leslie Gall to managing director in marketing, corporate solutions
Ted Glimp to managing director in corporate solutions
Michael Lee to managing director in corporate solutions
Meredith O’Connor to managing director in business and economic incentives, brokerage
Ann Marie Woessner-Collins to managing director in business and economic incentives, brokerage
Bill Barrett to EVP in corporate solutions, BioPharma
Gerald Donovan to EVP in corporate solutions
Timothy Spillane to EVP in corporate solutions
Samuel Hergott has joined Newcastle as retail portfolio manager. His responsibilities include strategic planning, leasing and property operations. Samuel brings six years of experience and previously was responsible for leasing and management of the firm's retail properties.
Leica Microsystems signed a lease for 64k SF at the Aptakisic Creek Corporate Park, 1700 Leider Lane in Buffalo Grove. CB Richard Ellis’ Keith Puritz and Hank Cox represented Leica Microsystems, while Bridge Development's Tony Pricco and CBRE’s Brett Kroner, Ryan Bain and Zach Graham repped ownership McMorgan & Co.
Boston-based Winthrop Realty Trust has awarded the exclusive leasing of 550, 650 and 701 Warrenville Rd. in Lisle to NAI Hiffman. The leasing team includes James Adler, Patrick Kiefer, Daniel O’Neill, and Garrett Schultz. Winthrop Management will continue to manage the properties on behalf of ownership.
Wonderlic has completed a long-term office lease for 26k SF at 400 Lakeview Pkwy. in Vernon Hills. The building part of Continental Executive Park is owned by PacTrust and was formerly was the Baxter Credit Union building. Poldolsky Northstar CORFAC International's Corey Chase repped the tenant. NAI Hiffman's Michael Flynn and Jason Wurtz repped building ownership.
Midwest Business Development has leased 13k SF of industrial space located at 1020 Davey Rd. in Woodridge. Lee & Associates' Jeff Galante and Brian Vanosky represented building ownership, Bridge Development Partners, and Countrywide Real Estate's Thomas Chen represented the tenant.
Schulz Properties' Theresa Schulz represented building ownership for the renewal of an 8k SF lease for Black & Veatch and new lease with Strategic Financial Group for 1k SF at 7600 County Line Rd. in Burr Ridge. Theresa also represented CenterPointe Church for 6k SF, and Capri Ristorante for 5k SF at 16108 Route 59 in Plainfield.
The Boulder Group has completed the sale of a single-tenant net- leased CVS ground lease located at 6355 West Belmont Ave. for $3.6M. The Boulder Group's Randy Blankstein and Jimmy Goodman represented the seller, a private Chicago developer. A New York-based institutional real estate company was the purchaser.
Magellan Realty has been selected for the 2010 Best of Chicago Award in the condo category by the US Local Business Association. The Magellan Realty team, led by multiple sales award winner president Leila Zammatta, has captured several residential gold sales awards for both unit and dollar volume from the Chicago Association of Realtors.
Tenants have it pretty nice in today’s commercial real estate market. Building owners are lowering rents and providing concessions just to get them to rent space in their half-empty properties.
A new report from CB Richard Ellis, though, hints that this might slowly begin to change in late 2010, at least for the industrial sector.
According to CB Richard Ellis, the U.S. industrial real estate sector’s national availability rate should peak at 14.2 percent by the end of September before falling to 14 percent in the fourth quarter of 2010. Analysts with the company predict a slow descent into the first half of next year, with a forecasted availability rate of 13.4 percent by the third quarter of 2011.
As Luciana Suran, an economist with CB Richard Ellis, said that this would be a welcome development for the industrial market. As availability falls, building owners can slowly boost their asking rents.
Suran said that the demand for large distribution-related facilities greater than 400,000 square feet has steadily grown during the past few quarters. She pointed to Indianapolis where the availability for such buildings is down more than 200 basis points from its peak. Building owners in Indianapolis have seen asking rents begin to grow.
Contrary to a popular Brazilian expression that says Brazil will always be the country of the future, JLL's investments and hotels teams think now is the time for Latin American countries to shine. The execs spoke to potential investors at the Ritz-Carlton Hotel about opportunities Tuesday afternoon.
JLL's had offices anchoring the north end of Latin America in Mexico City and Monterrey for 26 years and the south end at Sao Paulo and Rio de Janiero for 14 years, Pedro Azcue and Peter Roberts tell us. Peter says a new JLL survey reveals investors are the most interested in Mexico, Brazil, Colombia, Argentina, and Chile. Office and industrial are strong property types in the major markets in those countries. Pedro notes that emerging markets will lead the charge coming out of the recession and anticipates Brazil's strong fundamentals—including a 5% GDP growth and 1.3% population growth per year—will help it lead the way.
Focusing on Mexico, JLL's Hector Klerian says Mexico City's 38M SF of office stock would make it the 14th largest market in the US. Currently, it has just 8.1% vacancy, and large firms like GE and MetLife have recently signed 55k SF-plus leases. New deliveries will give the market some oversupply in the coming year, but unemployment is at or near pre-recession levels, so some absorption should happen quickly, Hector says. (Here we thought cries for a border fence were election-season fervor. Turns out, they were just attempts to stay on time, and on budget.)
Office Brokers Rock the Vote
Speaking of mid-term elections, political pundit Paul Green tried to break them down for the Chicago Office Leasing Brokers Association at a luncheon at NBC Tower Tuesday. Paul says a few races in Illinois have lost some of their significance. Both candidates for governor have failed to focus on the real issue—the state budget—in favor of attacking each other. The race for Obama's former Senate seat has placed too much focus on Broadway Bank, Alexi Giannoulas' family business. In a run for mayor, Obama chief-of-staff Rahm Emmanuel or sheriff Tom Dart will win in a landslide if they don't face each other, Paul says. He urged Chicagoans to vote for a strong mayor because a strong city council has historically been bad for business in Chicago.
We snapped JLL's Monica Moore, MB Real Estate's Kathleen Bertand, and Cushman's Steven Bauer before the luncheon. Monica was recently promoted to SVP. We've overheard whispers that Cushman is looking for new leadership in Chicago (again).
CHICAGO REPORTER MAUREEN WILKEY
Not many people dream of being a commercial real estate journalist when they grow up—in fact, Chicago reporter Maureen Wilkey wanted to be a ballerina until she was five, when she realized that few people actually get to be a ballerina (never mind her lack of rhythm). She then decided she wanted to be a writer. But the entertainment bug never left her—she penned three plays in high school, planning to be a theater major. But her parents encouraged a back-up plan, so she opted for the next lowest-paying degree, journalism.
After launching the biz section at the University of Illinois’ Daily Illini newspaper, she received four job offers, but only one in the big city—thus starting her career in real estate, as a staff writer and later editor at the Illinois Real Estate Journal. Her entertainment dream was finally realized when Bisnow came a-knockin’ in ’09, and she’s been pounding the pavement in the Windy City ever since. Running around to meetings and events has been great training—she recently ran the Boston Marathon in April with a personal best time of 3:29:03, and seeks to beat her half-marathon PR of 1:34:02 in Des Moines Oct. 17. When she’s not lacing up the running sneaks, you can find her volunteering at the Peggy Notebart Nature Museum’s butterfly haven, where she pins cocoons and releases newly emerged butterflies.
We know Chicagoans don't want to think about our beloved brats and Polishes going away, but we don't think they'll be sad to see the "sausage factory" of CMBS (thanks Paul Zeller for that imagery) become more refined. In fact, yesterday at our Bisnow Chicago Real Estate Summit, 500 of you heard finance pros promise to focus more on funding only necessary new construction.
On the national panel, moderated by Picher Nichols & Meeks' Gene Leone (right), Walton Street Capital's Jeff Quicksilver talked about his firm's sixth fund. The private equity company didn't do any deals in 2009, but this year focused on three marginal office properties in Southern California, emphasizing low leverage. First Industrial's Bruce Duncan is in the midst of de-levering his company's debts, made easier by being public during a recession, he says. GEM Realty's Denise Olsen sees new investors in the marketplace who weren't hurt by the recession. And HFF's John Pelusi says all the big players are back in the markets at 2007 cap rates for prime buildings in A markets like 300 N. LaSalle, which had multiple life insurance companies vying for its financing.
The Chicago panel was less bullish, though not lacking controversy. Zeller Realty Group's Paul Zeller says we probably won't see any new building for two to three years because tenants won't anchor something new without exploring the 13% of vacant office space. CB Richard Ellis' Todd Lippmann anticipates vacancies going up to 19%. Jones Lang LaSalle's Bruce Miller says new FASB regs may cause some tenants to rethink their real estate, either by signing shorter-term leases or buying space. Friedman Properties' Albert Friedman says he's succeeding by working harder to make sure he can get small- and medium-sized businesses in his buildings in River North. His optimism about Chicago led Todd to prod Albert to run for mayor. The Reznick Group's George Klenovich moderated.
We were honored that so many execs joined us to hear top local and national experts early in the morning. We're looking forward to seeing you all again inOctober.
We snapped AMLI Residential's Stephen Ross with Albert before the panel—the two are partnering on the new AMLI River North, an apartment building with ground-level retail at the corner of Clark and Hubbard. AMLI also sold a $59M complex in West Dundee last week and has a development site ready for a new TOD near the Metra and L stations on Main Street in Evanston.
Shepard Schwartz & Harris' Michael Breier, Reed Construction's Jack Hennessy, Keith Largay, Paul, and Plaza Properties' John Colt Landreth looked like they were about to do a deal yesterday morning. Keith is looking for new opportunities, while John is focusing on a business park that Plaza owns in La Salle County.
JLLs Brooke Houghton, Gayle Kantro, and Peter Thomas made the long trek from their offices on the 45th floor of the Aon Center to the MidAmerica Club on the building's 80th floor. Peter worked on the project management for the Microsoft offices in the Aon Center and is currently managing the build-out of Baker & McKenzie in Prudential Plaza.
Investors waiting for waves of distressed real estate assets to hit the market may be waiting indefinitely, according to billionaire real estate mogul Sam Zell.
Speaking at the BMO Capital Markets Conference in Chicago last week, Zell addressed a crowd of commercial real estate executives on issues ranging from global investment opportunities to the current political environment in the U.S.
When the economy was hit hard in 2008 many prognosticated that owners in the commercial real estate market would be forced to sell distressed properties at a rate that could be compared to the market of the early 1990s.
However, as we sit in September of 2010, this scenario has not played out and Zell does not see it happening anytime soon.
“With interest rates so low the banking industry has been inadvertently encouraged to hold onto assets,” he said. “The cost to carry interest is very low.”
Nationwide, new construction is historically low, keeping the supply side in check. As demand slowly returns and supply stays the same, owners will begin to see relief. If interest rates continue to remain low, banks will wait for this scenario to play out with little penalty.
There is also an imbalance of supply and demand in the real estate investment market, where a considerable amount of capital is targeting a small amount of quality assets, Zell said.
“As long as supply remains low the performance of high quality assets will continue upward.”
In Chicago, it would take $45 per square foot in rent to justify a new building, while most buildings are around $28 per square foot right now, he added.
Zell said that investment in core CBD property in the U.S. might be good for long-term investment engines like pension funds, but for many investors the returns will not be as good as they could be in other parts of the world. He has become bullish on emerging markets, especially Brazil, which he calls the “number one place to invest in the world.”
“The engine has changed in this recession,” said Zell. “It used to be that the U.S. got a cold and the rest of the world got sick. That is not the case anymore. In this last cycle the U.S. suffered, but places like Brazil, China, and India thrived.”
Zell is now the second largest homebuilder in the Brazilian market. He has had good experiences developing in China as well, but overall does not consider it as safe of an environment as Brazil. In China, the laws of supply and demand don’t necessarily apply as the Chinese government has overarching control of business transactions, making it too unpredictable of a market.
On the home front, Zell is less than enthused with the current political environment and does not hide that he isn’t pleased with the current resident at 1600 Pennsylvania Avenue, calling President Obama the “most anti-business president we have ever had.”
When referring to the upcoming November elections, Zell said that they are “the most important elections of my lifetime.”
“Control by one party has shown that absolute power corrupts absolutely,” said Zell. “There are no checks in the current system and we need balance. I think the business community sees this election as a stop to uncontrolled spending and regulation. If we don’t regain balance, I think it will cost this country growth.”
As far as U.S.-based real estate investments, Zell’s firm Equity Group Investments has most recently made purchases in the hotel industry. The firm owns 18% of Starwood Hotels, an investment that seems to be on the cusp of paying off.
“Demand is there for hotels,” said Zell. “They are not building any more hotels. Hotels were hurt on revpar, but occupancy is back up. When steady occupancy returns revpar will go back up.”
Commercial property developers took advantage of soaring property values at the market peak, using cash-out loans to pocket millions of dollars. Now lenders are left holding the bag. Crain's Lisa leiter talks with Christopher Carrol of Cohen Financial about these deals:
A number of years ago, the City of Chicago’s Department of Buildings (DOB) implemented a program intended to simplify and expedite the building permit review process for select projects. This “Self-Certification Program” allows the licensed architect of record to assume responsibility for code compliance on behalf of the client; as a result the plan review process is minimized and the permitting process is accelerated.
Depending on the scope and complexity of the project, the standard permit process can take anywhere from two to four months or even longer, if the project requires zoning modifications. In contrast, the self-certification process may reduce the permitting process to as little as two weeks.
The self-certification program requires that the architect be licensed in the State of Illinois, properly insured and that the scope of work comply with the Self-Certification Program Eligibility Requirements. Additionally, the architect must have successfully completed the City’s Self-Certification Training class, have an active Self-Certification registration and be the architect of record for the project.
Self-Certification projects must obtain zoning approval prior to the DOB’s intake appointment. The zoning review is performed by the Department of Zoning and Land Use Planning.
The architect of record seeking self-certification must personally attend the DOB intake appointment, which generally lasts one hour.
Intake appointments are scheduled on-line and are typically available within one to two weeks of the request. The permit application must be completed online prior to the intake appointment.
The following documents are required at the intake appointment:
Three bound sets of plans signed and sealed by the Architect of Record and stamped with the zoning approval stamp.
Building permit application signed by the Architect of Record, Owner and GC
Electrical permit application signed by the Owner and Electrician (if applicable)
Architect of Record Self-Certification Statement
Self-Certification Program Owner/Tenant Certification Statement
Self-Certification Program Hold Harmless Letter
Copy of the Architect of Record’s Certificate of Insurance
Self-Certification Training Class Certificate of Completion and Registration Number
Structural Peer Review Report by a DOB-approved Structural Peer Reviewer. For a Level Two Alteration project that includes structural services in the scope of work
Aldermanic Acknowledgement Letter (waives the required 10-day hold)
Chicago Energy Conservation Code commercial or residential compliance form
Acceptable submissions are approved for permit subject to audit & field inspections
Qualifying Commercial Projects
Not every commercial project will qualify for the process. Here is a quick list of project types that are approved.
Interior alterations and first-time tenant commercial build-out project types include: real estate, medical, dental and law offices, retail stores and markets.
Interior alterations and first time restaurant build outs that do not require a liquor license and are limited to 100 people.
New construction residential building up to four-story, six-unit projects as well as first floor business or mercantile occupancy, and approved prototype plans.
New construction of single story building limited to 25,000 SF, with business or mercantile occupancy and approved prototype plans not more than two years old. The prototype building must have gone through the standard review process.
Projects with occupancy, fire separation or existing changes are not eligible unless changing from business to mercantile or mercantile to business.
Structural Peer Review Report by a DOB approved Structural Peer Reviewer is required for a Level Two Alteration project that includes structural services in the scope of work.
The self-certification program enables one DOB project manager to oversee and assume responsibility for the entire approval process. The standard plan review process requires the owner/developer to interface with multiple departments and disciplines.
Why would an owner choose to delay a business opening, revenue generation and at the same time pay rent while waiting for a permit to be issued? The value of using a self-certified architect of record is clearly a winning proposition when applicable.
About the Author / Interplan LLC
Dennis Cabala is Director of the Interplan LLC’S Midwest office located in Oakbrook Terrace, Illinois. He has been providing architectural services nationwide with a concentration in the Midwest for restaurant, retail, and hospitality projects for the last 25 years. He may be reached at email@example.com
Yesterday, the Association of Foreign Investors in Real Estate welcomed Sam Zell to the Four Seasons in Chicago, where he gave investors a few Dr. Seuss-like mantras on how to see coming out of the recession as the opportunity of a lifetime.
Sam, here with AFIRE's Jim Fetgetter, DLA Piper's Martin Polvey, and PGGM's Werner Sohier, told the audience to come clean by '13. He says unlike previous recessions, banks aren't letting out their properties all at once, meaning investors have to look for the opportunities to buy distressed property. Dilution is the solution, Sam says—private investors should pay down the first mortgage of the property in order to create a greater number of investors to share the risk. Lenders need to stop extending and pretending, or our recovery will continue slowly. Sam anticipates very little new inventory in the US over the next two to three years, but he's bullish on Brazil.
We snapped Behringer Harvard's Ted Aisner and Kirkland and Ellis' Bruce Gelman, now both part of new landmark buildings in Chicago. Bruce is enjoying Kirkland's new office at 300 N. LaSalle, while Behringer Harvard recently closed on Burnham Pointe.
Legal eagles Jeff Usow of Mayer Brown and Bradley Arant Boult Cummings' Greer Cummings say pockets of the country are already coming out of the recession. Jeff is working on representing hotels as well as reorganizing capital stacks for investors.
KTR Capital Partners closed on the acquisition of 6006 West 73rd St. in Bedford Park. The 201k SF manufacturing facility is fully leased long term to Northstar Aerospace. The acquisition brings KTR’s total portfolio in the Chicago market to approximately 5.5M SF.
Zifkin Realty's Tyler Quast and Sarah Moberg represented the owner of 1023-1049 W. Main Street, Sleepy Hollow in the sale of a one-acre outlot to Aetna Development Corp. George Maniates represented the buyer.
A wholly owned subsidiary of Apple REIT Nine has entered into a series of purchase contracts for the potential acquisition of 16 hotels totaling 2,240 rooms for $291M. The sellers are affiliated with Merrillville, Ind.-based White Lodging. The aggregate initial deposits for the hotels totaled $4.8M. Illinois hotels in the portfolio include the Residence Inn and Hilton Garden Inn in Mettawa, the Hilton Garden Inn in Warrenville, and Hilton Garden Inn in Schaumburg.
HFF's Jaime Fink, Jeffrey Bramson, and Kenneth Glomb have closed the sale of The Atrium, an office building in Naperville, on behalf of the seller, a subsidiary of Prime Group Realty Trust. Farbman Acquisitions purchased the property for $3.6M free and clear of debt. The two-story property at 280 Shuman Blvd. has 69k SF of space.
Titan Commercial's Dan Steinberg represented private investor AJK LLC in the purchase of a vacant restaurant building at 680 Mall Dr. in Schaumburg. The investor plans to open a to-be-named American cuisine restaurant at the property, in an all-cash purchase totaling $1.2M, closed Aug. 30. The building was previously owned by Darden Restaurants, represented by Cushman and Wakefield.
Castle & Cooke Cold Storage has renewed its lease of a 267k SF warehouse in Joliet. Jones Lang LaSalle's Trevor Ragsdale, Kris Bjorson, and Dan McGillicuddy repped the tenant. CB Richard Ellis' Kirk Armour represented the building owner, TIAA-CREF. The new lease took effect Sept. 1.
Colliers International's Jeffrey Kapcheck and Brian Kling represented McCollister’s Transportation Group in a 150k SF lease at 525 Shingle Oak Dr. in West Chicago, consolidating the company’s four Carol Stream facilities. The landlord, KTR Capital Partners, was repped by Avison Young's Michael Fonda, Brendan Kelly, and Hugh Williams.
Zifkin Realty's Todd Cabanban, Marc Rubin, and Kyle Mayberry represented Dollar Tree in four transactions: 13k SF at Arlington Town Square in Arlington Heights (landlord repped by Baum Realty's Steve Schwartz); 25k SF at Rivercrest Shopping Center in Crestwood, and 11k SF at the Commons of Chicago Ridge in Chicago Ridge (landlord represented by Centro Properties' Bob Pionke), and for 10k SF at Springhill Mall Gateway in West Dundee (landlord repped by its principal, Stelios Aktpis).
Lee & Associates' Jeff Janda and Mike Plumb represented ETI in its lease of 30k SF of industrial space located at 1325 Ardmore Ave. in Itasca. Regional Realty's Jeff Holmes repped building ownership.
Best Transportation Services has leased 17k SF of industrial space at 1020 Davey Rd. in Woodridge. Lee & Associates' Jeff Galante and Brian Vanosky represented building owner Bridge Development, and Darwin Realty's Adam Haefner and Victor DeBoer repped the tenant.
Lee & Associates' Sergio Chapa represented Legion Safety in their lease of 4k SF of warehouse space located at 608 S. Wheeling Rd. in Wheeling. Schnoll and Co.'s Jeff Meyer repped ownership.
Krusinski Construction Co. will break ground Oct.1 on a new facility for SK Hand Tools at 1600 S. Prairie Dr. in Sycamore. The 130k SF manufacturing building will serve as the company’s corporate HQ for making sockets, ratchets, hammers, and wrenches. Expected completion date is January 2011. Kwasek Architects is providing the architectural and structural design and Missman Stanley & Associates is providing civil design and engineering.
Morgan / Harbour Construction was selected to complete a 32k SF warehouse expansion for Dik Drug Co. in Burr Ridge. Morgan/Harbour's Ben Warriner is the project executive and Chuck Panagakis is the project manager. Cornerstone Architects is providing the architectural services. The project is scheduled for completion in Q1 2011.
ARCO/Murray National Construction Co. completed its second tenant improvement project for Delve in the past 24 months. Delve has occupied its current space since for 15 years. The building is managed by NAI Hiffman Asset Management. ARCO/Murray's Brad Dannegger is the project executive with Leonidas Stellakis as the PM.
ARCO/Murray National Construction Co. completed an 6,500 SF tenant build-out for Lincoln Investments at 500 Water’s Edge. The firm was contracted to complete the interior build-out of interior office renovations, modern executive offices, and conference rooms. ARCO/Murray's Joe Pomerenke, was the project executive with Chris Niedhammer as the lead PM.
Englewood Construction completed construction on the 3k SF Marcello’s Market and Deli at 155 N. Wacker Dr. The 26-seat fast casual restaurant is located on the ground floor of the John Buck Co.’s 46-story commercial high-rise at the corner of Wacker Drive and Randolph Street The restaurant was designed by Barker Nestor, based in Skokie.
Inland Real Estate Auctions announced the Oct. 27 auction of a 12k-SF at 1335 S. Michigan Ave. Previously priced at $2.9M, it is being sold at auction in October to facilitate the seller’s requirement to close the deal by the end of the year. The property, which was at one time a book binding facility, has recently been improved with a new roof and façade, and is ready for build-out.
Harrison Street Real Estate Capital completed the second closing of its third fund, Harrison Street Real Estate Partners III LP, raising over $330M to date. This milestone comes three months after the firm held its first closing in June of this year. Harrison Street's Christopher Merrill said the fund expects to raise $500M, which equates to approximately $1.75 billion in purchasing power by year end. The company specializes in off-campus student housing, seniors housing, medical office buildings, and storage properties.
Quasi-distressed opportunities lead the way for acquisitions in Behringer Harvard Multifamily REIT I. The unlisted REIT reigns as one of the largest multifamily buyers in the US. The fund has acquired a total of 30 properties—20 since June 2009.
Here's Behringer Harvard COO Mark Alfieri (no, it isn’t Steve Carell but we’re not the first to notice the resemblance). He tells our Bisnow Dallas reporter Tonie Auer the REIT is targeting busted condo deals and converting them to apartment properties. Mark says the focus is on the West Coast and Northeast (where about 80% of the capital has been invested) adding that young properties—with an average completion date of 2008—are on the REIT's radar.
Calling it real estate gold for apartments, the coup de gras for Mark was the acquisition ofForty55 lofts in Marina del Ray (that's California, if the trees didn't give it away). The custom home-style condos feature granite, loft design and wood floors, and were priced from $900k to $1M. But the 2009 completion of the project was horrible timing that benefited Behringer Harvard. Mark says the REIT bought the empty property at a substantial discount to cost within a few weeks of first looking at it. Closing immediately, walls were put in the lofts to create bedrooms, and it was leased up at rents markedly higher than projected, he says. The most recent deal, Acappella, was closed four weeks ago outside San Francisco. The empty condo project had been tied up in a workout without having ever leased a unit, Mark says. Also recently acquired is Burnham Pointe, a 298-unit, 28-story former condo project in the South Loop.
Mark, here with SVP Peggy Daly and CIO Bob Poynter, tells us the REIT is about halfway through completing its portfolio and is targeting between 50-70 assets. When the financial markets collapsed, Mark says that there were only a few institutional level investors buying in 2009. "These were some of the most amazing buys in my 23 years of doing this. We were buying at a fraction of cost in many places.” Wanna hear more? It's road trip time. Mark is speaking at our Multifamily Summit on Sept. 24 at the Meyerson Symphony Center in Dallas. Pack a bag and sign up today.
Parc Huron: First Chi LEED-Gold Apartment
The recently opened River North apartment complex is the first LEED-Gold apartment in the city, RMK Management Corp.'s Diana Pittro tells us. She says many potential lessees come in because of the location or amenities and find that they like the green elements, which range from the fifth-story green roof to premier parking for carpoolers, Zip Cars, and anyone with a low-emission car. The tower is about 40% leased, units ranging from $2,100-$4,200 per month.
The big windows in each unit are shaded to block light waves that would heat the unit. Other green features: sustainable flooring and Energy Starappliances. To reduce paper use, RMK will post a TV screen near the mailboxes with announcements for residents, as well as use e-mail instead of distributing or posting fliers. RMK is also building a park adjacent to the building, opening this fall.
AMLI at Canterfield Sold
TA Realty paid $59M for the AMLI at Canterfield in West Dundee, according to property records. AMLI acquired the 352-unit luxury complex in 2004 for $55M, and it's 93% occupied. TA recently raised $1.9B in equity for its ninth fund, which will invest mostly in office properties.
A Downstate bank has filed foreclosure suits seeking to collect $8.9 million on three development sites along North Milwaukee Avenue in Logan Square, a strip that beamed with development potential before the recession.
Morton Community Bank has sued a venture managed by David C. Kluever, a downtown lawyer, and John R. Burns, a former senior executive with the commercial real estate firm now called Eastdil Secured LLC.
Messrs. Burns and Kluever are named in the lawsuits because they personally guaranteed the loans, according to the complaints, filed in May and July in Cook County Circuit Court.
The two men looked to control multiple parcels in a concentrated area, says Mr. Burns, now managing partner of Chicago-based real estate firm Cooper Conlin Partners LLC. But the mixed-use projects they had planned never moved forward because of the “implosion of the real estate market,” he adds.
The two men are in talks to restructure the loans, says Mr. Kluever, a partner in law firm Kluever & Platt LLC.
Morton Community Bank did not return a message.
The bank, based near Peoria, inherited the loans as part of its 2009 purchase of assets of Citizens National Bank, a Macomb-based financial institution that was shut down by regulators.
Between June 2007 and February 2008, Citizens financed the venture's purchases, for a total of $9.8 million, of three properties on the 2200 block of North Milwaukee Avenue, a strip known for such trendy spots as the music venue the Congress, the Tini Martini bar and Cozy Corner Diner & Pancake House.
At the time, the prospects for a building boom along Milwaukee Avenue seemed so strong that then-Alderman Manuel Flores (1st) launched a yearlong land-use zoning study of the strip, in part to ease the existing residents' concerns about congestion. The study was completed in late 2008.
But any plans for new projects were dropped because of the recession, and the corridor hasn't seen any interest in new, big projects, says Raymond Valadez, who was chief of staff under Mr. Flores and continues to hold that post under the current alderman, Proco “Joe” Moreno.
The Burns-Kluever venture bought a vacant lot at 2201-2229 N. Milwaukee Ave., a vacant lot at 2257-2373 N. Milwaukee Ave. and a vacant grocery warehouse at 2274 N. Milwaukee Ave.
The longtime friends planned retail/residential projects for each of the parcels, but put those plans on hold in July 2009 because financing was no longer feasible, Mr. Kluever said. The loans weren't paid off when they came due in July, the bank alleges.
Mr. Burns co-founded Chicago-based Cooper Conlin Partners in 2003. He was a highly regarded investment sales broker with Chicago-based John Buck Co. before joining the Chicago office of Eastdil in 1997. He was fired by the New York-based firm, a subsidiary of bank holding company Wells Fargo & Co., in 2002.
In 2004, he pleaded guilty to misdemeanor bank larceny in U.S. District Court in Chicago, admitting he stole about $25,000 from Eastdil through inflated expense reports, according to a copy of his plea agreement. He was sentenced to three years of probation and paid restitution.
“The matter was resolved years ago,” Mr. Burns says in a follow-up e-mail. “Because my employer was owned by a bank, federal authorities got interested and charges were filed.”
Last week, Mayor Richard Daley announced that after 21 years he won't be seeking another term. So we spoke with JLL's Meredith O'Connor—on the Mayor's staff for 16 of those years—about his contributions to our city's real estate.
Meredith says she'll remember her great friend forMillennium Park and World Business Chicago, two initiatives that drew tourists and businesses alike not just to Chicago, but to the surrounding six-county region. Changing building codes to enable new technologies and bringing the number of TIF districts in the city from 19 to 156 during Meredith's tenure were huge draws for tenants, she tells us. Meredith hopes Chicagoans will support another business-friendly mayor for their next leader in March.
Movin' On Up
What's the worst part of getting a new place? Moving, of course. That's why KMS' Ken Stone, here with Yuri Ackerman and Elke Quade, started his new relocation and consulting service. The 28-year moving industry vet will link businesses that are relocating with many different resources in the moving arena—moving companies, phone and furniture dealers, IT services—to insure that all parties have a smoother experience. Also on the firm's docket: a business line that will help start-ups get set up with an office space.
Not a lot of firms are moving right now, so KMS, which opened in July, has filled its time by helping Chicago's public schools move all of their furniture out and back in for asbestos abatement and painting over the summer. Yuri is in charge of the technical aspects, which are much more complicated than they used to be, especially for companies that have never set up their own IT before. The team is hoping stimulus money for small- and medium-sized businesseswill help more of clients who want to improve space and move over the coming months.
Healthcare Facilities Expo Highlights Rush
Creative solutions are popping up everywhere at the Healthcare Facilities Symposium and Expo at Navy Pier this week. The panel of Pepper Construction's Mick Metzger, Navigant Consulting's Michael O'Keefe, Midwest Orthapaedics at Rush's Dennies Viellieu, and Perkins + Will's Jerry Johnson talked about how to effectively manage a JV medical project. Midwest Orthapaedic is working on a building in conjunction with the new Rush University campus upgrades. Keeping communication open and making sure everyone approves physical building plans was key, Dennis says. Jerry is proud of the new loading docks Perkins + Will designed for the buildings—they're underground (better to have trucks than patients there, we presume) to give more space to delivery trucks, which can make a complete turnaround in the enclosed area.
Also on the Rush campus project, Ragnar Benson'sScott Solverson and Jim Mahalko are working on building out the new tower's top five floors. The patient rooms and offices in the cross-shaped building going up along I-290 near Ashland are slated for completion by the end of 2011, Scott says.
GENERAL EDITOR CURTIS RAYE
Today begins a new series where we pull back the curtain on our Bisnow editorial staff. Whether you're actually curious what we look like, or just need to know who to smack, we hope you enjoy.
Curtis Raye, left (with Stefan Lawrence of sketch comedy group Elephant Larry), is the general editor of Bisnow, where he oversees 13 publications in a burgeoning news empire. He first came to our attention several years ago when “first banana” Mark Bisnow asked the Dalai Lama who he turns to for spiritual guidance and one-liners. Curtis graduated from George Washington University with a degree in political communications, or as he puts it, “a fancy word for combining media and politics.” He grew up 270 miles away from Bisnow’s HQ in the town of Wantage, NJ (population 10k), where cows outnumbered people until fairly recently: “This was a big moment in Wantage history, when the people finally caught up with the cows.”
Curtis once watched a movie starring Al Gore’s college roommate, Tommy Lee Jones. This generosity paid off years later when Hillary Clinton tapped him to be a field organizer in the key state of Iowa during the ’08 presidential race. She excelled in his rural counties, so we presume he talked his friends, the cows, into caucusing. Curtis spends a lot of his spare time doing improv comedy (pic above), and on many nights, you’ll find him performing with DC’s Washington Improv Theater. On weekends, he volunteers as a Kennedy Center tour guide. Curtis also created a Web series in which he visits the final stops in the DC Metro system; in it, he revealed that the cars are sometimes driven by geese. Despite his early stint in politics, Curtis is a stickler for accuracy and clarity. He enjoys the storytelling aspect of news but prefers doing it in unorthodox ways: “I like the challenge of finding unique ways to impart information.”
With just six days until our Chicago Real Estate Summit, we sat down with panelist Albert Friedman. His company owns buildings with some of the most popular restaurants, from Frontera Grill to The Bull and the Bear and the recently opened Sunda. (It's just a fraction of the 52 buildings it owns, manages, and leases, mostly within a 12-block radius in River North.)
Here's Albert, who tells us many of Friedman's properties are adaptive re-uses from what was once a much seedier neighborhood. Restaurants led the way for Friedman to get involved in other businesses like hotels and the new Greenway Parking Garage. The company announced last month it will control the retail space for the new AMLI River North apartment building, which will start construction at the corner of Clark and Hubbard, making the neighborhood a 24-hour destination. Next Tuesday, gain insight from Albert and the many top names we've assembled: Duncan, Quicksilver, Zeller, Ryan, Pelusi, Lippman, Leone, and Klenovich. Sign up now!
Court Halts Foreclosure Sale
An Appellate Division judge has halted a UCC foreclosure sale for the ownership of 500 West Monroe in Chicago. The sale was scheduled for yesterday, sources say. The temporary stay follows litigation by affiliates of Broadway Partners against Piedmont and Transwestern Mezzanine Realty Partners II. The litigation alleges breach of contract, fraud, and makes related claims in connection with actions by Piedmont and Transwestern to interfere with and deprive Broadway of its extension rights. Broadway is seeking a permanent injunction barring the lenders from foreclosing.
The industrial markets are starting to see a little more action again, and so is Blackhawks forward Patrick Sharp, here signing an autograph for Choose DuPage's Kathleen Guiterrez at the AIRE Tradeshow in Rosemont yesterday. In recent news, Choose DuPage helped Navistar in its decision to move to Lisle, for which the Illinois Finance Authority approved $314M in tax-free bonds yesterday. They'll also issue $145M in Recovery Zone Bonds for the project.
We snapped McShane Cos.' Mike Winger, Sheri Tantari, Megan Brody, and Steve Pacholik. They're working on a brand new 25k SF build-to-suit for NSK America Corp. at their Huntington 90 business park in Hoffman Estates and will have two new non-industrial projects to announce soon.
Jones Lang LaSalle won our pick for best swag: a shoe-shine station. Here's JLL's Keith Stauber getting his high-tops shined by Cadillac, a regular shoe-shiner at Carlucci's in Rosemont. JLL's industrial team recently repped Jacobsen in a 500k SF lease in Shorewood in a building owned by ING. Keith says he's working on another 800k SF lease along I-80 that should be completed soon.
The old Chicago Main Post Office, the empty hulk that spans the Eisenhower Expy., is finally hitting the tax rolls. It's never been taxable before because it was under federal ownership. That changed a year ago, when secretive British investor Bill Davies bought it from the U.S. Postal Service for $25 million.
Cook County Assessor James Houlihan's staff has completed its work on the property and, from what I can gather, Davies shouldn't be too upset by his first encounter with the local taxing authorities. He benefits from the building's most striking feature: vast vacancy.
By my calculation, Davies' first tax annual bill should be around $240,000, payable starting late in 2011. My estimate is based on the assessor's review of the property as relayed to me by Houlihan's spokesman, Eric Herman.
The market value of the land and its building came out to almost $25 million, almost exactly what Davies paid for it, but that's just the start of calculations in Cook County's circuitous system. The assessor assigned $4.6 million of that value to the land and the rest to the structure itself. The assessor, concluding that the property is distressed and not producing income, then assigned a 10 percent "occupancy factor" to the $20 million value for the building, reducing it to $2 million.
Davies got no special favor, even though he's been cagey enough to hire the connected zoning attorneys at the law firm Daley & George. Herman said the reduction is standard practice because in valuing commercial property, the assessor gives weight to both its market value and its income history.
Thomas McNulty, a property tax lawyer and chairman of the Civic Federation, said he sees nothing untoward in the old post office's assessment. "It's pretty much a uniform rule" to reduce valuations for poorly performing commercial buildings, he said. An occupancy factor of 10 percent "is common when a building is distressed and vacant and boarded up," he said. The post office, 433 W. Van Buren, has been empty since 1996.
Jack George, partner at Daley & George, said he isn't dealing with the tax issue for Davies, and an assistant to the developer said no such lawyer has been hired. The assistant declined to say if Davies will appeal the assessment, which many commercial property owners do.
Lastly, while the 2.5 million-square-foot giant is finally taxable, it appears not one dime of Davies' bill will flow to local governments. The post office is within the city's Canal-Congress tax-increment financing district. TIF districts siphon increases in property taxes into a special account for developer subsidies and public works.
The building could become the biggest argument yet for ending that special treatment and sending all property taxes to local governments.
CAN'T LIGHT UP: The condo association that governs the 28-unit building at 1418 N. Lake Shore Dr. said it has accomplished a first. It is apparently the first condo building in Illinois to prohibit smoking anywhere on its premises. That means even the residents can't smoke in their own homes within this posh building, which was notable when it opened in 1981 because it has only one unit per floor, with floor-to-ceiling windows overlooking the lakefront.
The only exception is that an owner can light up in a room that's equipped with an air-filtration system that keeps the smoke out of the building's shared ventilation. The association said all but two of the building's 28 owners voted for the change in the condo declaration.
Some will see this as an intrusion on civil liberties, but condo boards fight over so much that's inane, like gardening rules or posting a religious symbol on your door, that one of them might as well stand up for healthy living. Legal experts in this area said condo boards have the right to regulate smoking, just as they are free to ban pets. There is no constitutional right to smoke.
By the way, the building reports it has one unit available, asking price of $2.2 million.
ACCOLADE LADLE: Congratulations to David "Buzz" Ruttenberg and Michael Supera, who will be inducted into the Chicago Association of Realtors' Hall of Fame at a dinner Thursday at the Chicago Marriott, 540 N. Michigan. Ruttenberg is a founder of Belgravia Group Ltd. and Supera is president of Supera Asset Management Inc. They worked in partnership to develop 530 and 600 N. Lake Shore Dr., but also independently have helped revitalize the North Side since the 1970s.
CALENDAR NOTE: The Chicago chapter of the Urban Land Institute has assembled an A-level panel to dissect the office market in downtown Chicago and the suburbs. The breakfast discussion will be Sept. 28 at the Union League Club of Chicago, 65 W. Jackson. For details, go to chicago.uli.org.
Big changes are afoot in the market for commercial property information, with new products and technologies promising to dramatically lower the cost of property research, change the way it is gathered, and make it ubiquitously accessible to real estate professionals wherever they are.
Historically dominated by a handful of providers, the market for information services is beginning to see important new product innovations. The new property research database recently announced by LoopNet, however, is one of the most significant for a couple of reasons.
First among these are its size and price. Encompassing over 7.5 Million property records, the LoopNet property database represents one of the largest databases in the industry, and LoopNet is making it available for free to its Premium Members during the beta launch period.
The database covers all major property types — Office, Industrial, Retail and Multifamily — and provides a wealth of detailed property information including:
Owner Details & History
Tenant Rosters & Details
Mortgage & Lender History
Tax Records & Assessed Values
Property Details and Photos
Asking Price & Asking Rent Trends
LoopNet is also enabling nationwide search access with no geographic restrictions, making it easy for a broker in New York, for example, to research the property market in Atlanta.
A second innovation is the methodology and approach that LoopNet employs to aggregate and assemble the data. LoopNet is leveraging multiple sources of information, including traditional data sets such as public records and leading third-party data providers, but is also integrating the member-contributed information that emerges from its marketplace at LoopNet.com. LoopNet’s marketplace visitor activity and its membership base are the largest in the industry, giving it a substantial advantage in being able to supplement existing data sources with up to date information.
“The goal is to provide a truly national service that is far more efficient and affordable than is possible with traditional data research approaches,” says Mike Manning, LoopNet’s VP of Marketing.
Finally, these innovations in affordability and efficiency are combining with another important trend: accessibility. LoopNet launched the first commercial real estate iPhone application earlier this year to allow users to search, locate and access all 745,000 commercial listings being marketed for sale and lease on the LoopNet marketplace from their mobile devices. LoopNet is now broadening its mobile footprint with the recent launch of an iPad App that adds access to the more than 7.5 Million property records included in their newly launched property research database. The larger iPad screen allows for an enhanced user experience and better presentation of the more extensive data sets provided by the LoopNet property database.
It is easy to envision a day when mobile devices, connected to low cost, extensive databases of property information, maps, photos and documents, dramatically change the way commercial brokers research properties and present information to clients. Imagine standing in a retail space for lease with a client and being able to instantly pull up a list of the other tenants in the building and a list of competing businesses within a 10 block radius, then conducting a virtual drive down the neighboring streets on an iPad using Google Street View — all without leaving the building. That day is coming, and it will significantly expand the ways the commercial brokerage industry uses information to drive our businesses forward.
With Bisnow'sChicago Real Estate Summit just a week away, we sat down to chat with Zeller Realty Group founder Paul Zeller, one of our many panelists, about the five-building portfolio he manages in the Chicago area, as well as where the markets are headed.
Paul, who got into the real estate business in the early '70s, says the amount of space one person takes up in an office building has decreased significantly. (We blame Jared the Subway guy.) When he started, many people had 400 SF offices. Now, the average office worker uses only about 250 SF. That, coupled with high unemployment, is contributing to vacancy in the overall market. On the investment side, Paul says we'll have to work through the glut of CMBS loans coming due over the next two to four years, and one of the other major financing vehicles will need to pick up the slack. Transparency in finance is going to be key this time around, so we don't fall into the same trap, Paul says. To hear more, join hundreds of your colleagues next Tuesday as Paul and a panel of CEOs, managing principals, and other execs talks about Chicago real estate this year and beyond. Sign up today!
Gain Without Pain
The Alter Group earned its first NAIOP Developer of the Year award for its 2010 efforts, but it's not all the kind of work you would expect from a developer. Part of the reason Alter won was by deciding when not to develop, says Alter's Rich Gatto (right), here with EnTrust's Jim Clark. Alter chose not to branch out too far into property types outside of its core strengths and picked up the slack by further developing peripheral lines of business, such as AlterAsset Management, AlterCare (a healthcare division) and Alter 360 (a tenant rep brokerage focusing on small- to medium-sized businesses). It also completed work on Fornelli Hall, a multi-school residence at the Pittsfield Building downtown.
One11 West Illinois Street in River North was Alter's major office development of last year. There's still space available in the tower, whose anchor tenant Erickson Institute owns its space. Three restaurants recently signed for the ground floor. In addition to its contribution to real estate, Alter has had success with City Year, a program that encourages high school seniors to give a year to helping their city between high school and college. Rich says Alter has a lot more in the works, with several sites in Florida, California, Arizona, and Chicago going through design and permittingso they're ready for tenants as the economy recovers.
New Home for the High Holidays
This building at 1200 Lake Cook Rd. didn't look much like a synagogue before Finegold Alexander and Associates got ahold of it two years ago. With the help of the congregation of B'Nai Jehoshua Beth Elohim and Krusinski Construction, the single-story plaza in Deerfield was converted from a semi-vacant office to a synagogue. As the congregation found more of its members living in Deerfield than its previous location in Glenview, it started looking for a new space, but found few tracts of land large enough to support their 1,200-plus members. The 80k SF complex is about two-thirds complete and hosted the first half of the high holidays for Rosh Hashanah last week.
FAA's Maurice Finegold and Tony Hsiao said they wanted to incorporate a lot of light into the rehabbed building, as well as keep some old elements intact for sustainability and to give a sense of the past. The new synagogue includes a common area that can easily host a wedding as small as 200 people to a 1200-person holy day service. Maurice says this is one of the first offices that has been converted to a place of worship in the country, but he expects to see more as religious institutions look for sustainable and economic ways to relocate when they outgrow their existing space. Not one to miss an opportunity, we hear publishers are updating The Bible, changing Moses' occupation from shepherd to receptionist.
Jones Lang LaSalle has announced that Castle & Cooke Cold Storage, one of the nation’s largest third-party cold storage providers, has renewed its lease of a 266,680-square-foot warehouse in southwest-suburban Joliet.
Trevor Ragsdale, Kris Bjorson, and Dan McGillicuddy of Jones Lang LaSalle completed the transaction on Castle & Cooke’s behalf. Kirk Armour of CB Richard Ellis, represented the building owner, TIAA-CREF. The new lease took effect Sept. 1.
The building is located at 1695 Crossroads Drive within Joliet’s Rock Run Business Park at Houbolt Road and Interstate-80. The 287-acre park contains 12 buildings with 3.5 million square feet of industrial space. Other tenants include Mack Trucks, PETCO, Tyco Healthcare and Unisource.
Castle & Cooke Cold Storage, which was formed by the 2009 merger of Inland Cold Storage (ICS) and Madison Warehousing, now operates approximately two dozen warehousing facilities totalling more than 2.7 million square feet in California, Illinois, Texas, Missouri, Maryland and Georgia.
HFF has closed the sale of and arranged financing for The Lakes of Schaumburg, a 428-unit multifamily community in Schaumburg. The HFF investment sales team was led by Marty O’Connell and Sean Fogarty. HFF's Matthew Lawton repped the seller, Cornerstone Real Estate Advisers.
A JV between Marquette Real Estate Investments and TRECAP Partners purchased the property free and clear of debt. HFF managing director Matthew Schoenfeldt worked on behalf of Marquette and TRECAP to secure the $33M, fixed-rate acquisition loan through Freddie Mac. The Lakes of Schaumburg at 801 Belinder Lane is more than 95% leased.
Navistar will be moving to the former Alcatel-Lucent East campus in Lisle on Warrenville Road; it credits Gov. Pat Quinn and Attorney General Lisa Madigan with clearing a path for the company to retain or create nearly 3,000 permanent jobs over the next several years along with more than 400 construction jobs. The company will invest $110M in the 1.2M SF Lisle HQ, which will include executive management, business operations, and product development.
HSA Commercial Real Estate's Tim Thompson and Brad Borkowski represented Midwest Warehouse in a lease for the entire 550k SF facility at 2805 Duke Pkwy. in Aurora. Colliers Bennett & Kahnweiler's Lynn Reich and Brian Kling represented ownership, Duke Realty Corp.
NewMark Merrill Cos. and their local partner, GMX Real Estate Group, signed a lease for Meijer Super Markets at regional power center Winston Plaza at North Avenue & 9th Avenue in Melrose Park. NewMark Merrill, GMX Real Estate Group, and Metro Commercial Real Estate represented Winston Plaza and Meijer real estate department, lead by Michael Flinkinger. Bobowski and Associates represented the lessee in negotiations. The new Meijer will be more than 90k SF.
Inland Real Estate Corp. signed 19k SF of new and expansion leases at three shopping centers in north suburban Niles and Skokie. AutoZone signed an 8k SF lease at the Golf Road Plaza shopping center in Niles. American Mattress signed a 5k SF lease at Four Flaggs Marketplace in Niles. The AT&T cellular store at the Shops at Orchard Place in Skokie signed a lease to expand from 3,370 SF to 4,570 SF. In addition, Revive Chiropractic has leased 1k SF at the center.
TMP Worldwide Advertising & Communications leased 16k SF, the full 31st floor at 444 North Michigan. The building was represented by Cushman & Wakefield's Lenora Adds. Previously a subtenant, TMP has expanded to accommodate their growing staff with the addition of 20 new employees.
Douglas Elliman's Retail Group's Faith Hope Consolo and Joseph Aquino arranged new store for Italian children's fashion brand MonnaLisa at 49 East Oak St. The children's clothing store joins neighbors Barney's New York, Jimmy Choo, Hermes, Jil Sander, Kate Spade, Vera Wang, and Prada.
The Department of Veterans Affairs leased 4k SF at the 8330 Naab Rd. medical office building, which it will use for an outpatient counseling center. HSA PrimeCare's Robert Titzer repped HSA Commercial.
Jones Lang LaSalle promoted 11 Chicago-based professionals in its brokerage, communications, corporate solutions, project & development services, hotels, and strategic consulting practices:
Richard L. Benoy to SVP in landlord leasing
David Bukovac to SVP in corporate solutions (Honeywell account)
Joseph Caprile to SVP in project & development services, development management team lead
Brad Kreiger to SVP, internal communications (Americas)
Monica Moore to SVP in landlord leasing
Paige Steers to SVP public relations (Americas)
Matthew Oxley to SVP in corporate solutions
Annette Prater to SVP in markets
Asin Shah to SVP in corporate solutions
Eric Stavriotis to SVP in strategic consulting
Justin Epps to SVP in hotels
Peter Buhl joined Newcastle Ltd. as senior asset manager. He is responsible for overseeing Newcastle's portfolio of multifamily assets, developing long-term strategies, and monitoring property performance. Prior to joining Newcastle, he worked with Lincoln Property's Midwest region.
Jameson launched of a newly formed division to expand its operations to include business brokerage with and without real estate. This endeavor will offer service to buyers and sellers. Mike Costanzo will lead the new division with more than three decades of experience. Accompanying him is Susan Hwang. With listings including Bon V, Via Carducci, and The Lake County Sports Center, a 78k SF property in Waukegan, Jameson is licensed to sell any business that is not publicly held.
Sales and Acquisitions
Waterton Residential acquired $109.5M of debt secured by four prime multifamily properties located in North Carolina and California. So far this year, Waterton has acquired $179.2M in distressed debt secured by multifamily assets and expects to acquire another $150M in debt and/or multifamily properties by the end of 2010. The recent debt acquisitions include mortgages secured by the Exchange at Brier Creek, a 274-unit property in Raleigh, North Carolina; Skyline Terrace Apartments, a 139-unit property in Burlingame, Calif.; Waterstone Corona Pointe Apartments, a 628-unit property in Corona, Calif.; and Copper Canyon Apartments, a 296-unit property in Riverside, Calif.
Paine/Wetzel • ONCOR International's Michael Nelson and Mark Nelson have completed the sale of a 24k SF industrial building located at 340 N. Sacramento in Chicago for $784k. Martinez Seafood and Produce has purchased this partially complete structure with plans finish the building to accommodate the expansion and relocation of their frozen seafood and produce operation. The Nelsons repped the seller, and John Cocomise and Chicago Brokers' Frank Fernandez worked on behalf of the buyer.
Paramount Lodging Advisors sold the 67-room Baymont Inn & Suites at 3300 Kinney Coulee Road North in Onalaska, Wis. to Crescent Lodging. PLA’s Adam Montufar and Brian Fay represented the seller, Selo Stubla LLC. The Baymont Inn & Suites will continue to operate within the Wyndham franchise system and be managed by Crescent Lodging Management.
The Village of Winthrop Harbor has engaged UGL Equis to assist in developing a strategic plan for the Village to evaluate the potential to acquire The North Point Marina Project from The State of Illinois. North Point is the largest freshwater marina in North America. UGL Equis' Michael Hoadley and Michael Pontarelli will be developing the strategic plan for the Village, and are expected to submit their final report with recommendations before Oct. 1.
Chicago Lakeside Development, a venture of McCaffery Interests and US Steel Corp. announced that the Chicago City Council has approved a redevelopment agreement for the creation of Phase 1 of the Chicago Lakeside Development Master Plan. The plan is Phase 1 of a proposed development of nearly 500 acres on the southeast side of Chicago. Phase 1 will include the construction of new public infrastructure and the mixed-used development identified as The Market Common, an 800k SF project featuring retail, restaurants, entertainment venues, and residential units.
McShane Construction Co. recently completed the five-story, 73-unit Casa Maravilla senior living complex. The residential facility, located at 2021 S. Morgan Street in the Pilsen, features 70k SF of affordable seniors rental housing. Casa Maravilla is a development of The Resurrection Project, a community nonprofit org supporting neighborhood development. Casa Maravilla is registered with the Chicago Green Homes program and is McShane's second multifamily project. Weese Langley Weese provided the architectural services.
The Berwyn Development Corp. broke ground for the Roosevelt Road Streetscape Improvement. The culmination of more than eight years of planning by Berwyn, Cicero,and Oak Park resulted in the appropriation of nearly $7M in state and federal funding for the improvement of Roosevelt Road, from Harlem Avenue to Austin Boulevard. The three communities will share additional costs, which brings the total value of the improvement to the corridor in excess of $10M. The completion of the streetscape project is scheduled for late 2011.
Morgan / Harbour Construction was selected to complete a 12k SF office build-out for Apac Customer Service at 2201 Waukegan Rd. in Bannockburn. The property is a development of Keystone Property Group and owned by Bannockburn Lake Office Plaza Associates IV. Morgan/Harbour's Ben Warriner is the project exec and Josh Peters is the project manager. Morgan/ Harbour's Jim McCarron is the site superintendent. Interwork Architects is providing the architectural services.
Englewood Construction announced it's working on six new projects, including a five-store build-out for New Zealand-based jeweler Michael Hill and a new Pei Wei Asian Diner in Willowbrook. Averaging 1k SF, the five new Michael Hill stores will occupy space formerly leased to Whitehall Jewelers and Lundstrom Jeweler stores. The 3k SF Pei Wei Asian Diner will be in Willowbrook Town Center and was designed by Aria Group Architects
M&R Development and RMK Management Corp.'s new apartment building, the Parc Huron at 469 W. Huron St. has achieved LEED Gold from the USGBC. Credits were earned for the development of an adjacent park, a green roof, extensive use of natural light throughout the units and the common areas, and for the walkable location in the heart of River North.
Since Apartment Realty Advisors opened its Chicago office in 2007, the brokerage has seen a consistency in the geography and property type and more than $1B in sales, including the largest apartment sale in Chicagoland last year, the 592-unit AMLI at Chevy Chase in Buffalo Grove, ARA professionals think multifamily could lead the way out of the recession soon.
Yesterday we chatted with two members of ARA’s Chicago sales team, Susan Lawson and Debbie Corson. Prior to opening the door here, ARA completed two years of exhaustive research on the Chicago multifamily market, contacting, photographing, and mapping every large apartment property downtown and in the suburbs to document ownership, rents, and occupancies. The launch of ARA’s Chicago operations was immediately followed by the beginning of the recession and the worst real estate market slump in decades. But the ARA team says that the soft market has created opportunities for new capital and buyers to participate in a market with traditionally low sales volume.
ARA completed the largest suburban apartment sale in Chicagoland last year, the592-unit AMLI, quickly followed by the sale of JP Morgan’s Landings at Lake Zurich. This year the team has listed two major properties in the Chicago area—the REO Woodland Park in Bronzeville (above) and Lakeview Townhomes in Aurora—and is working on several large off-market deals. The team aims to continue the slow and steady growth, and has a goal of gaining more ground as apartment occupancy and rents increase.
CREW and the Illinois Real Estate Journal joined forces to celebrate the careers of some of Chicago's top women in real estate for the third annual Women in Real Estate Awards luncheon. We snapped the awardees: Colliers' Lynn Reich, JLL's Meredith O'Connor (Bright Horizons Award), Perkins Coie's Alex Cole (Career Achievement Award), Transwestern's Stacey Kruger Birndorf (Crystal Apple Award), Haworth's Kelly Martincin (Community Service Award) and Shepard Schwartz & Harris' Deanna Arce (Bright Horizon's Award). Meredith, who previously worked in the public sector, helped move Navistar to Lisle, a great example of how public-private partnerships can create jobs in Illinois. The move will keep 3,000 jobs in the state.
Hoping to win next year, Kovitz Shifrin Nesbit's Jessica Ryan, Kerry Bartell, and Julie Jacobson join Titan Commercial's Paige Winkels and Emily VanderBeek. Titan is listing several retail properties on the North Side. Julie and Jessica work with evictions and foreclosures, which they say gives them insight into the housing market. They've seen more distressed renters and homeowners get new jobs, giving hope of an upturn soon.
Don't Let Them Bite
Chicago now has a new reason for infamy as Terminix ranked our city fifth in bedbug population around the country. The critters have been found in places like the Swissotel, Westin River North, and Sheraton Hotel and Towers, according to Bedbug Registry, a website that tracks bedbug findings. And New York-based Metro Pest Control SVP Greg Zarek (left, with colleague William Vizcarrondo) has seen a 100% increase in these pesky critters visiting commercial spaces this year. But it’s not the landlord to blame—it’s the tenant who brings in the bugs from home and is not being proactive in treating residential infestations. You’re not the only one taking public transportation to work, Greg says—the bedbugs are hitching a ride too. How do you know they’re in your building? There’s telltale signs—droppings, bloodstains, the bedbugs themselves, and itchy, bitten workers. They hide in cracks and crevices as small as 1/32 of an inch and can survive without a blood meal for more than a year, he notes.
What can landlords do? Regularly scheduled inspections are inexpensive and can warn you of an impending infestation at work and at home, Greg says. Chemical sprays, done on a monthly basis, leave a residual deterrent. Be wary of other methods to kill bedbugs, from heat to freezing, he says—many are expensive and not guaranteed to keep the bedbugs out. And many of those bedbug-sniffing dogs you see aren’t as effective as claimed—they’ve learned to “find” bedbugs for treats, and follow-up inspections have shown nothing (except for a satisfied pooch). The firm has also created a Bed Bug Workplace Action Plan, which helps owners and facility managers be on high alert. Employers need to make sure employees are knowledgeable on how to identify an infestation and how to avoid spreading it, as well as speak up if they suspect a developing infestation at home or at work. Having a clear policy creates an environment of fairness and helps to dismantle the social stigma associated with this issue in the workplace, Greg tells us.
A federal judge has tossed out much of the lawsuit filed against Bank of America Corp. by Spire developer Garrett Kelleher, who was seeking to avoid repaying two loans by alleging he was wrongfully overcharged interest.
The ruling, which revolves around the issue of the bank calculating interest on a 360-day year rather than 365 days, marks a significant setback for Mr. Kelleher and his Dublin, Ireland-based Shelbourne Development Group Inc., which had proposed building a twisting condominium tower that was to be the tallest building in North America on a site along the Chicago River and Lake Shore Drive.
B of A sued Shelbourne in August 2009, seeking to collect $4.9 million on two loans for some preliminary expenses related to the Spire, which never got beyond foundation work. Mr. Kelleher personally guaranteed the loans, according to the suit filed by Charlotte, N.C.-based B of A.
Shelbourne and Mr. Kelleher countersued last October, alleging the bank committed fraud and violated state law by basing its interest calculations on a 360-day year rather than 365 days, resulting in higher interest charges. The suit seeks unspecified damages and says B of A should be barred from declaring default and accelerating the loan.
The lavish Spire sales office at NBC Tower closed recently, after the landlord sued to evict over unpaid rent. And while the Spire site at 400 N. Lake Shore Drive is now a circular hole in the ground, media reports say Mr. Kelleher continues to seek new financing for the project.
In an Aug. 18 ruling, U.S. District Court Judge Amy J. St. Eve dismissed the fraud claims against B of A and threw out Shelbourne's contention that the 360-day interest calculation violates state law, saying a national banking law supersedes.
She also doused the notion that B of A acted in bad faith, stating that the 360-day term — common in commercial real estate loans — was spelled out in the loan agreement.
Six days after her ruling, Judge St. Eve referred the case to a magistrate judge for a settlement conference. The first hearing before that judge is scheduled for Sept. 28.
A spokeswoman for Shelbourne didn't return an e-mail, and a spokesman for B of A declines to comment.
Shelbourne's lawyer in the matter, Glenn Udell of Chicago-based law firm Brown Udell Pomerantz & Delrahim Ltd., said he plans to ask the judge to reconsider the ruling.
If that's not successful, he expects Shelbourne to appeal. He notes that another federal judge recently sent a similar case back to state court. In that case, the judge agreed with the lawyers — including Mr. Udell — that the plaintiff wasn't alleging the bank charged more interest than allowed by state law, but rather that the bank charged more interest than was represented in the promissory note.
In the Shelbourne case, Mr. Udell also claimed a partial victory for his client because Judge St. Eve didn't strike the developer's defense that it couldn't perform on the loan due to the “unforeseeable and unprecedented economic downturn and recession.”
B of A's loan said Shelbourne was required to have a construction loan commitment by November 2008. When that deadline was missed, the bank says it was entitled to accelerate all amounts due and demand full payment.
Shelbourne countered by invoking “commercial impracticability,” arguing that B of A executives made repeated public statements that the credit crunch and collapse of the commercial real estate market were unprecedented and couldn't be predicted.
Judge St. Eve agreed, saying B of A had not shown “to a certainty” that it would prevail over Kelleher's claim that financing could not reasonably be obtained.
New York-based TMP Worldwide Advertising & Communications, an independent recruitment advertising agency,has leased 15,685 square feet, the full 31st floor at 444 North Michigan. The building, represented by Lenora Adds of Cushman & Wakefield, has signed 38,476 square feet of deals since the second quarter of this year.
Previously a subtenant, TMP has expanded to accommodate its growing staff with the addition of 20 new employees.
In other recent transactions, Monster Worldwide Inc. re-upped for 8,385 square feet. Anthony Karmin of Transwestern represented the tenant, parent company of jobs resource website Monster.com.
Joining the tenant roster, VerveLife, a digital entertainment company represented by Konstantine T. Sepsis and Daniel J. Nikitas of MB Real Estate, signed a 4,683-square-foot office lease at 444 North Michigan.
Accounting firm Leavitt Siegal signed a 2,253-square-foot lease negotiated by Josh Lapins of ForeFront Properties. Brian Poe and Michael Wolfson of Marc Realty arranged a 2,245-square-foot transaction for shopper engagement and solutions firm Lunchbox, while Ross Cosyns of Prudential Rubloff Properties represented energy efficiency and sustainability consulting firm Integrated Resource Solutions in a 2,163-square-foot lease.
Additionally, Brailsford & Dunlavey relocated its Chicago office to 2,025 square feet at 444 North Michigan. Steven R. Goldstein of Chicagobroker.com represented the Washington-based facility planning and program management firm in the deal.
The staff at First Industrial has been resilient the last few years, and CEO Bruce Duncan says the Chicago-based industrial REIT has reduced its senior debt by more than $200M since the beginning of 2009, with now just $225M through 2012, down from $728M.
Bruce joined the company in last year to help delever the company's balance sheet, which he and the team are working on by selling off assets and raising equity. The REIT still owns 800 properties nationwide, and owns and manages 6.5M SF in the Chicago area. With the portfolio about 82% leased, getting occupancy up is the next big goal for First Industrial. Bruce says the industrial sector hasn't seen the distress that some other property types have, so the REIT won't be acquiring until they see the perfect opportunity.
Bruce has a broad background, working for companies as diverse as Starwood Hotels, Equity Residential, and JMB. He finds industrial an interesting product type because the transactions are “bite-sized”—it's easier to find lenders as well as users or investors willing to spend $1M to $10M on a warehouse property than $50M plus on a downtown office or a regional mall. Bruce says that while First Industrial still has a ways to go on delevering, the qualified people at the company are getting the job done. After having seen a lot of cutbacks, they're determined to get back on top, he adds.
Memories of Memory Rock
Several real estate companies banded together to support Alzheimer's research last week at Memory Rock at Joe's on Weed. The event, which featured the musical stylings of Golub's Dr. Bombay and a silent auction, raised $23k. We snapped Newmark Knight Frank's Richie Klein, The Alzheimer's Association's Erna Colborn, Golub's Good Guy Lee Golub, Alzheimer's Association's Nancy Rainwater, and Halyard Group's Joanne and Larry Blankenstein enjoying a few drinks. Golub will be busy this week with its Hancock Observatory serving as the first US site for the World Federation of Great Towers Conference. Sorry, Lord of the Rings fans, even though it's literally an association of towers and skyscrapers, neither of your two towers make the cut.
ABCO Electric's Guy Greco, Grubb & Ellis' Steve Monroe and MB Real Estate's Mark Buth joined in the festivities. Steve organized the event for its third year and was happy with the turnout, which included 300 people. Mark is the leasing manager for 220/225 N. Michigan, where the Alzheimer's Association is a tenant. As for MB, it added four new associates while we were on vacation last week.
Stitching for the 21st Century
More than 600 guests were in attendance at the 6th annual Stitch Fashion Show benefiting the Illinois Interior Design Coalition. Furniture, carpet, textile, and related manufacturers partnered with
local design firms including teams from VOA, Partners By Design, Perkins Eastman, HOK, IADT and Harrington Design Alumni to create garments out of interior design materials. Each team selected a decade as a theme for their design—above is the 2010-themed design of Izzy, Knoll Textiles, and SmithGroup.
Navistar representatives, along with roughly a dozen Illinois officials, announced plans this morning to move the engine manufacturing company’s headquarters to Lisle, retaining thousands of jobs in DuPage County.
“I’ve got one thing to say. Illinois is Navistar country,” said Gov Pat Quinn. “We believe in Navistar.”
Navistar President Dan Ustian added that the project would create about 500 engineering jobs right away.
The company said it will invest $110 million in the 1.2 million-square-foot Lisle headquarters, which will include product development.
Navistar’s headquarters are currently in Warrenville, though the company also employs more than 1,000 workers in Fort Wayne, Ind.
The technology center once envisioned for the Lisle campus will move, possibly to the Melrose Park facility as part of a possible $80 million investment. Another $15 million will be invested in a new parts facility.
Combined, Navistar will be investing $205 million in Illinois. The state gave Navistar an investment package of up to nearly $65 million, including tax credits.
The North American Industrial real estate sector has delivered positive news for the second quarter 2010, according to a new, national report by Jones Lang LaSalle. National average vacancy rates have tumbled 20 basis points for the first time in almost two years from 10.6 percent in the first quarter to 10.4 percent in the second quarter. Leasing activity across many markets is up but the sector is still vulnerable to mixed economic indicators which could make sustained recovery slow or sporadic at best.
“While we can report some overall positive news for the sector, we are still very much at the mercy of this precarious economy,” explained Craig Meyer, managing director and leader of Jones Lang LaSalle’s Logistics and Industrial Services group. “Declining consumer confidence, the fading impact of the federal stimulus support and worldwide economic volatility are forcing many industrial landlords, tenants and investors to look back over their shoulders in fear of a double dip recession.”
While labor market pressures and slow job growth are dragging on the economy and keeping pressure on consumer spending, there have been positive indicators to offset some of the down side. Increasing corporate profits have renewed long-term optimism which has in turn spurred a significant amount of second quarter industrial leasing activity. This was fueled by large occupiers executing significant renewal, consolidation or relocation transactions helping to temper overall vacancy figures. However sustained deal volumes will be essential for a stronger turnaround in current trends.
“With the rise in Corporate America’s second quarter profits and a need to restock inventories that were running at 50-year lows, a number of large occupiers have strategically captured high quality logistics space at cyclically low rates,” said Meyer. “Opportunities remain in virtually every market at aggressive terms and even with the very modest levels of leasing and little or no speculative construction, choices are quickly becoming limited in some markets especially in the Class A large block sector.”
“In fact there is only 11.3 million square feet of new construction in the pipeline and 83 percent of that is pre-leased. With such low levels of new construction planned in the foreseeable future, we expect to see an increase in build-to-suit activity,” he concluded.
Around the U.S.
The report which tracks 38 key industrial markets in the U.S. found that average net absorption is at 11.1 million square feet for the quarter, but remains negative at 7.4 million square feet so far this year, compared to last year’s total of 126.6 million square feet percent. Markets that also act as supply chains are performing well such as New Jersey where vacancy declined 60 basis points joining the Inland Empire with 4 million square feet of positive net absorption year to date, along with Dallas posting 2.4 million square feet of positive gains; both markets are trending toward organic growth.
“While pent up demand was responsible for some of the leasing activity, renewals still comprise a healthy share of market demand across the country,” said Meyer. “Many businesses are still sensitive to cost control and possible economic volatility so we are still seeing the ‘blend and extend’ market continue.”
The overall availability of sublease space has decreased across the country, a positive sign that demand is on the rise again. The highest volumes of marketed sublease space reside in Northern and Southern California, especially in Sacramento and the Inland Empire as well as mid-tier markets in the Southeast such as Memphis and Nashville.
The report also shows that nearly 66 percent of all the industrial markets tracked by Jones Lang LaSalle experienced positive net absorption with a further 20 percent showing declining absorption. Major industrial markets such as Chicago and Los Angeles account for a combined 8.3 million square feet of negative net absorption so far this year. However, both are showing recent signs of stabilizing, with submarkets around their ports and airports benefitting from recent growth in container traffic and cargo tonnage.
Demand for high-end, prime logistics space is topping the general market and has given a boost to Midwest markets like Memphis, Columbus, Dallas/Fort Worth in addition to the Inland Empire in Southern California, as well as key distributions markets in the Northeast such as Central New Jersey, Philadelphia and Harrisburg.
Overall average asking rents are still declining across the country, but the rate of decline is slowing and in second quarter fell by 1.1 percent. The lowest industrial rents are in Columbus and Memphis and the highest in San Diego, San Francisco’s Bay Area and South Florida. Competition for tenants is fierce in almost every market and the growing level of concession packages, including periods of free rent and tenant improvement packages continue to be a critical component when completing deals.
A Mixed Outlook
While the economy is giving mixed messages and keeping real estate players cautious, demand for industrial real estate is slowly improving. Leasing in the form of expirations, early renewals and ‘blend and extend’ transactions has been providing the market with deal activity. If expansion requirements continue from large institutional users, the industrial market may keep its head above water and progress towards full recovery.
By at least one measure, things are looking up for the downtown office market.
The amount of space available for sublease has dropped 20% since the end of last year, to 3.38 million square feet at the end of the second quarter. That's the lowest amount since the end of 2008, according to data from Chicago-based MB Real Estate.
Sublease space is a good indicator of market conditions because it shows how much excess space companies are looking to unload. So sublease space tends to rise, as it did from mid-2007 through last year, when demand for office space is weak. Sublease space generally declines when demand is strong.
Less sublease space also is a positive for landlords because it reduces competition, and sublease space is generally cheaper than so-called direct deals with landlords.
Over the past decade, sublease space peaked in 2002 at 6.28 million square feet — a result of the dot-com bubble bursting — and then bottomed out in 2007 at 1.98 million square feet.
Sublease availability stayed relatively low this recession the 130.5-million-square-foot downtown office market, peaking at 4.2 million square feet in the fourth quarter last year.
Andrew Davidson, an executive vice-president who heads MB's tenant-representation group, says he's not convinced the fall in sublease space means the market is turning in landlords' favor.
Sublease space appeals to tenants in today's market because many want move-in conditions and cheaper rents, Mr. Davidson says. Also, sublease space has become increasingly attractive as many cash-strapped landlords are no longer willing to pay much for move-in renovations, which is generally an advantage of so-called direct leases with landlords.
“I think there's been a lot of people searching for good, as-is conditions,” Mr. Davidson says. “It's certainly a good sign that the sublease market went down, but until there is real job growth I'm not convinced that the market has made its permanent turn for the better.”
In MB's second-quarter report on the downtown office market, the firm says layoffs and employment declines in this recession have far outpaced office space reductions, suggesting the direct vacancy rate, which excludes sublease space, is poised to climb higher after edging up 0.1 percentage point in the second quarter to 16.1%.
“MB Real Estate's baseline office forecast expects substantial declines in occupancy over several upcoming quarters to correlate with job losses,” the report says.
The firm predicts the direct vacancy rate will exceed 17% by the end of 2012 and that demand for office space won't turn positive until 2013.
Also, because there's so much uncertainty about the economy, many companies are just sitting on excess space rather than seeking to sublease it, and are likely to restructure and downsize when their leases come up, Mr. Davidson says.
“I think there's a lot of excess space,” he says. “Some tenants aren't even willing to talk about any type of extension right now. They would rather sit with excess space for a year or two rather than extend five years.”
Local landlords had some reason to feel encouraged by economic reports last week. The U.S. Labor Department said Friday that the unemployment rate edged up to 9.6% in August from 9.5% in July. But private payrolls climbed by 67,000, more than economists had forecast.
“The double-dip talk was probably misplaced,” Maury Harris, chief economist at UBS Securities LLC in New York, told Bloomberg News. “From a historical perspective, things are still soft. The economy ought to be doing better.”
The Chicago Business Barometer, an index of U.S. business activity, last week showed an 11th straight month of growth, but six of the seven indicators that make up the report showed “slowed expansion.”
The index, compiled by the Institute for Supply Management-Chicago and formerly known as the Chicago Purchasing Managers Index, registered 56.7 in August, down from 62.3 in July and lower than economists' forecast of 57.6 from a Dow Jones Newswires survey.
According to the MB report, just one large block of sublease space was added to the downtown market in the second quarter: Citigroup Inc.'s 58,094 square feet at 227 W. Monroe St.
Just four other large blocks of Class A space are available for sublease downtown, while there are four such spaces in older, so-called Class B buildings.
The largest sublease spaces on the market are:
• Aon Center, 200 E. Randolph St., 296,247 square feet, expiring December 2011, and 95,103 square feet, expiring December 2013.
• 231 S. LaSalle St., 167,179 square feet, expiring June 2023.
• 600 W. Chicago Ave., 117,001 square feet, expiring November 2015.
Merchadise Mart Properties issued a statement today denying rumors that Vornado Realty Trust was selling The Merchandise Mart. Reports Saturday indicated that Vornado was making plans to sell the property for $1B.
An MMPI spokeswoman says Chris Kennedy's quote that Vornado would sell the property if they could reinvest for a higher yield should apply to any publicly traded entity and does not mean that the Mart is for sale. In MMPI's case . . . there is no book prepared, no retained counsel, no investment banker, no broker, no process being pursued—all things that would indicate a property described as being "up for sale," according to the statement by MMPI.
CB Richard Ellis' Keith Puritz and Brett Kroner repped Midwest Air Technologies in its purchase of 821 Bluff Rd. in Romeoville. The 507k SF new industrial building was sold by Land and Lakes Development for an undisclosed amount. Midwest Air Technologies will take occupancy of the building this fall. Colliers International's Lynn Reich and Jeffrey Kapcheck repped Land and Lakes Development. US Asia Group acted as a consultant for Midwest Air Technologies.
Paine/Wetzel · ONCOR International has completed four sales in the Chicagoland area totaling more than 30k SF:
Spiros Stamelos purchased an 11k SF building located at 3026-3030 W. Carroll in Chicago as an investment opportunity. The building sold as a short sale with the lender. Paine/Wetzel's Mark Nelson and Michael Nelson repped seller Wicker Heights Contracting Co.
Foresite Management purchased a 10k SF building located at 285 Jamie Lane in Wauconda. The IT and electrical contracting firm is relocating from Barrington. Paine/Wetzel's Pat Ryan represented the buyer while Premier Commercial Realty's Bruce Bossow represented the seller.
Lolita Ranchero purchased a 5k SF office condo at 1400 W. Fulton in Chicago. Paine/Wetzel's Mark Nelson, Michael Nelson, and Kim Aigner represented the seller, while Garrett Realty's David Fulton represented the buyer.
Bid On Equipment purchased a 5k SF building at 2860-54 Corporate Parkway in Algonquin. Paine/Wetzel's Pat Ryan repped landlord Plote Properties.
Inland Real Estate Brokerage's Paul Montes and Eric Spiess represented the purchaser and the seller in the sale of 1 S 210 Summit Ave., a two-story, 17k SF office building in Oakbrook Terrace. The property also features a 9k SF basement, an exterior truck dock and elevator access on all three levels. The seller was North American Baptist Conference. The buyers, two practicing physicians, plan to convert the property to medical use. The Law Offices of Vincent M. Cannon represented the buyers.
Marcus & Millichap's Demetrie Livaditis represented the seller in the sale of the 6k SF Swanson Corners Retail Center, a 100% occupied retail center located in Grayslake. The asset sold at a price of $1.25M, which represents a cap rate on current NOI of 8.34%.
Lee & Associates's Justin Fierz and Brian Vanosky represented the tenant, Hosley International, in a long-term lease renewal and expansion for a 469k SF industrial space located at 6750 Daniel Burnham Dr. in Portage, Ind. The value of the lease is in excess of $7M. The landlord, Lincoln Financial Group, was represented by Darwin Realty's Chris Gary and George Cibula.
Paine/Wetzel · ONCOR International completed three industrial lease transactions totaling 62k SF.
Xcell International Corp. leased 31k SF at 20 W 345 101st Street in Lemont. Paine/Wetzel's Jerry Sullivan and Brandon Wright represented the landlord, Manulife Financial, and CBRE's Pete Roberson repped the tenant.
Veolia ES Technical Solutions signed a 25k SF lease at 5137 Indianapolis Blvd. in East Chicago, Ind. Paine/Wetzel's Adam Karras repped the tenant, while Paine/Wetzel's Edward Wabick represented the landlord, Sims Metal Management.
High Performance Auto Body & Detail signed a 7k SF lease at 450 S. Spruce St. in Manteno. Paine/Wetzel's Brandon Wright and Curtis Nugent Real Estate's Chris Curtis represented the landlord, Manteno RFT LLC. Curtis Nugent's Joe Nugent repped the tenant.
CB Richard Ellis’ Keith Puritz, Brett Kroner, Ryan Bain, and Zach Graham represented CenterPoint Properties in a 60k SF lease at 1175 Lakeside Dr., Gurnee to Select Marketing Solutions. The company will take occupancy of the entire building this fall. HSA Commercial Real Estate's Doug Reed repped Select Marketing Solutions.
HDG Mansur awarded Transwestern the leasing assignment for Arlington Pointe, 95 West Algonquin Rd. in Arlington Heights. Built in 1983, the 137k SF Class B office building has two contiguous floors, totaling 50k SF, available for lease. Transwestern's Joe Stevens, Fred Ishler, and Zach Fox are the exclusive leasing agents on the assignment.
Paine/Wetzel · ONCOR International has completed three industrial lease transactions totaling 50k SF.
Chicago Messenger is expanding its lease to 38k SF at 1120 West Exchange. The firm is relocating from 1600 South Ashland. Paine/Wetzel's Michael Nelson and Mark Nelson represented the tenant in the transaction and Colliers Bennett & Kahnweilers' Vern Schultz and Mike Senner repped the the landlord, The Missner Group.
Fellowship Fleet signed a new lease at 438 W. 43rd St. in Chicago for 6k SF. The limousine service is relocating from its prior location at W. Polk Street. Paine/Wetzel's Albert Schulman represented the tenant and Chicago Industrial Real Estate's Matt Rogatz repped the landlord, a private investor.
Robinhood Garcia is relocating his mattress company from 36th and California to 3421 W. 48th Place, signing a new 6k-SF lease. Paine/Wetzel's Michael Nelson and Mark Nelson, represented the landlord, 3421 Building Corp. while the tenant was self-represented.
TreeHouse Foods will move its corporate HQ to a 48k SF space at 2021 Spring Rd. within the Commerce Plaza office complex in Oak Brook. In addition, MetLife Bank has signed a lease for 14k SF at 2015 Spring Rd. in the same complex. The two leases bring the overall occupancy rate of the 556k SF Commerce Plaza to more than 84%. JLL's Karla Harmon represented the property owner, Arden Realty, Inc., in both transactions. TreeHouse Foods was represented by CBRE's David Lind while MetLife Bank was represented by Jones Lang LaSalle.
Garrett McKenzie Environmental signed a five-year lease for 34k SF at 921 Sherwood Dr. in Lake Bluff. CB Richard Ellis’ Keith Puritz, Brett Kroner, Ryan Bain, and Zach Graham were the sole brokers in the transaction. The building is owned by CPIA LLC.
Inland Real Estate Corp. signed 21k SF of new leases at three far north and northwest suburban shopping centers. The new leasing activity includes a 15k SF lease with Discovery Clothing at the Rivertree Court shopping center, located at 701 N. Milwaukee Ave. in Vernon Hills. At Hawthorn Village Commons in Vernon Hills, Salon GC signed a 1,609 SF lease. European Gourmet Restaurant also leased 2k SF at Hawthorn Village Commons. At Woodland Commons in Buffalo Grove, Stilettos Inc. signed a 1,653 SF lease. Papa John’s Pizza also recently leased 1,244 SF lease at Woodland Commons.
Gyu-Kaku, a Tokyo-based restaurant chain, has leased 12k SF at 210 E. Ohio St. for a new restaurant. Gyu-Kaku features a Japanese barbecue concept. @properties Lee Ffrench and Nancy Simon Cooper repped the building owner, a partnership known as CORU 210 LLC. Redac's Yoshi Nakaoka repped the tenant, Reins International, USA, a subsidiary of Tokyo-based Rex Holdings Co.
Cawley Chicago Commercial Real Estate's Tom Gath secured eight leases on behalf of his clients in the O'Hare market. Seven of the eight deals were done direct, totaling 25k SF. On behalf of his client AMB Property Corp., Tom leased four units in the AMB O'Hare Center at 9755 Farragut in Chicago and 9812, 9818, & 9848 Farragut in Rosemont. At 605 Country Club Lane and 854 Eagle Dr., both in Bensenville, Tom secured leases for his client RREEF.
Aries Capital's private commercial real estate lending affiliate, Aries Real Estate Fund has concluded a $3.2M venture organizing the completion and sale of all units within The Atwood Condominiums of Chicago. Aries Capital has also launched a new division of the firm—Aries Asset Management Services. Located just east of Clark Street in the Andersonville neighborhood of Chicago, The Atwood Condominiums is a 12-unit development. Led by Aries' Andrew Wilson, the project began in November 2009, when the firm accepted a deed-in-lieu of foreclosure on the vacant property. Keller Williams' Liz LaTour brokered the sales of the renovated one- and two-bedroom units which were sold within five months of the completion of construction. Canmann &Chaiken's David Chaiken provided counsel in closing the 12 units. Kalamper Construction served as the general contractor for the project.
The second phase of engineering to support the electrical systems for a 315k SF data center facility on Chicago’s Near South Side has begun, developer JRM Technology says. The design and construction team is now working with ComEd to finalize engineering for the data center’s significant power needs. The facility, to be located at 111 E. Cermak Rd., will be the first structure in downtown Chicago designed and built specifically as a data center. James McHugh Construction Co. is the design-build contractor, with ESD Inc. as lead architect/engineer, Archideas is the consulting architect and CS Associates is structural engineer.
Development Solutions was retained by Career Education Corp. to renovate an existing building for their new medical education school Sanford Brown College. During construction, DSI removed and replaced all of the buildings mechanical and electrical equipment to upgrade them to CEC's strict usage requirements.
Summit Design + Build has been selected as GC for an extensive remodel to an existing 26k SF facility for Daily Meat Supply Co. in at 2323 W. Fulton in the West Loop. The renovations include a new 10k SF-10 degree freezer, 13k SF of refrigerated cooler space, processing and loading dock area, and 2k SF of office space with mezzanine. The entire MEP system is being completely redone from new HVAC units, to all new refrigeration units, and new incoming electrical service. The construction also includes resurfacing of the parking lot and a new roof. Completion is scheduled for Fall 2010.
Tim Gallagher joined Cushman & Wakefield as a director in the industrial brokerage practice. He will be based in C&W’s Rosemont office after spending the last seven years as president of his own company, Gallagher Realty, which focused on the acquisition, development, ownership and management of industrial and office property. He is a graduate of University of Wisconsin.
Meghan Marschall joined JLL to oversee business development for the Project & Development Services group in the Midwest. Meghan comes to JLL from HOK, where she served as director of business development in the firm’s Chicago office. She is a graduate of Purdue and a board member for CoreNet Chicago, where she chairs the Emerging Leaders committee.
Lou Jacobsohn has been promoted from associate to senior associate at Transwestern's Tenant Advisory Services Group. Most recently, he completed include a 29k Sf long-term lease at 350 West Mart Center on behalf of TCS Education System; a 22k SF lease at 222 N. LaSalle on behalf of TCS. He is a graduate of Indiana University.
For more than $1 billion, you can buy Christopher Kennedy's Merchandise Mart Properties Inc.
Parent company Vornado Realty Trust has been dropping hints along Wall Street and with potential buyers that it wants to sell the subsidiary, including the fortress-like structure along the Chicago River. The New York real estate investment trust purchased it from the Kennedy family in 1998 for $630 million.
Vornado's efforts already have yielded a $1.25-billion offer, but that deal died last month, people familiar with the negotiations say.
A sale could portend big changes for Mr. Kennedy, 47, who as Mart president since 2000 has led a major expansion of the business, which stages trade shows and leases showroom and office space in eight buildings nationwide. The Mart's management team is likely to be a key part of any deal.
Vornado executives are expected to continue to troll for a buyer for the Mart, which has been battered by recession and tenant defections and doesn't fit with the REIT's core business of owning office and retail properties in New York and Washington, D.C., analysts say.
“The Mart division has been identified by management as an asset best owned and operated by someone else,” says John Guinee, an analyst at Baltimore-based Stifel Nicolaus & Co.
Mr. Kennedy declines to comment on whether the REIT wants to sell off the Mart but says Vornado's management “will look at yield above everything else, and if they can reinvest at a higher yield, they will. Always.”
The Kennedys have been associated with the 3.5-million-square-foot Merchandise Mart since 1945, when patriarch Joseph Kennedy paid $12.5 million for the architectural gem. Under Christopher Kennedy's management, the Mart has expanded from four buildings in two markets to eight buildings in six markets totaling nearly 8.9 million square feet.
The Mart acquisition, along with the 1997 purchase of a stake in a cold-storage company, helped solidify Vornado Chairman Steven Roth's reputation as an unorthodox real estate investor. He's also acquired short-term stakes in public companies, such as local giants McDonald's Corp. and Sears Holdings Corp. The REIT still owns a nearly 33% stake in New Jersey-based Toys ‘R' Us Inc., acquired in 2005.
Even before the recession, analysts and institutional investors complained that Vornado had become too complex, hurting the stock price. Two years ago, after selling off its cold-storage business, Mr. Roth publicly pledged to “simplify and prune” the REIT.
Cohen Bros. Realty Corp., a New York-based firm that operates four home design centers nationwide, was ready to assist in that process, offering $1.25 billion this summer for most of the Mart's assets, sources say. It's unclear why a deal couldn't be reached. Company CEO Charles Cohen did not return calls requesting comment.
The pool of other potential buyers is likely to be small because of the size of the Merchandise Mart and the uniqueness of the showroom business.
The Mart division has struggled over the last eight quarters, recording a cumulative loss of $12.8 million, earning the distinction of being the REIT's worst-performing business segment. The Mart's EBITDA, or earnings before interest, taxes, depreciation and amortization, plunged nearly 14%, to about $100.5 million, in 2009, down from $116.4 million in 2008.
In March, a Mart affiliate defaulted on a $218-million mortgage on a showroom complex in High Point, N.C., after the property failed to generate enough cash to cover the payments. Mart executives are in talks to restructure the debt.
“This is a business that public investors won't sufficiently appreciate during good times, so I think that the Vornado story, at the end of the day, would probably be better off without it,” says analyst Michael Knott, of Newport Beach, Calif.-based real estate research firm Green Street Advisors Inc.
Vornado executives decline to comment, a spokeswoman says.
But Mr. Kennedy says the Mart has been a very good long-term investment for Vornado shareholders. A turnaround in performance is already under way, he says, citing several new lease deals that have not yet taken effect.
Mr. Kennedy also is looking to snare more government work, like the management of a new $425-million medical mart and convention center in Cleveland scheduled to open in 2013.
He also says he'd be interested in taking over management of McCormick Place. If Mart executives could come up with a creative plan for the South Side convention center, “we'd love to do that.”
Whatever his plans for expanding the Mart unit, Mr. Kennedy says he has no interest in leading a buyout of it.
“The business is in very good hands with Vornado,” he says. “The balance sheet, which has access to billions of dollars of cash, gives us an enormous competitive advantage.”
Baum Realty Group has announced that Roka Akor has signed a lease to open in River North. The contemporary Japanese restaurant has locations in Hong Kong, London, and Scottsdale, Arizona making Chicago Roka’s 2nd North American location.
Named one of the “Top 10 Sushi Spots in the United States” by Bon Appetit magazine, Roka Akor offers fresh sushi and sashimi, seasonal fish, poultry, and meat and vegetables on the open charcoal-grill cuisine cooked on the robata grill.
Located at 111 W. Illinois, Roka will occupy approximately 6,538 square feet at the southwest corner of Illinois and Clark.
Steve Schwartz and Adam Secher of Baum Realty represented Roka Akor in this transaction.
Also at 111 West Illinois, Steve Schwartz & Adam Secher of Baum Realty Group has represented Bombay Spice, a new Indian restaurant concept also located in Phoenix, Arizona. The restaurant touts healthy dishes for an affordable price, in a contemporary dining environment. This concept prides itself on low-fat and heart healthy dishes along with gluten free, vegetarian- and vegan-friendly options.
The restaurant will occupy 2,079 square feet of space with frontage on Clark Street.
Roka Akor is a JNK Concepts restaurant that currently owns and operates 5 restaurants in Arizona. This includes Nobuo at the Teeter House, Bombay Spice & Wine, Puro Gelato, and Los Taquitos.
CRL Senior Living Communities will break ground on a new Alzheimer’s/memory care and assisted living residence in Morton Grove on Sept. 14.North Grove Manor, located at 5520 Lincoln Ave., will offer 84 large private and semi-private suites with a total of 112 beds.
Scheduled to open next fall, the $20 million facility will offer a host of amenities designed to improve the wellbeing of residents, including private bathrooms with walk-in showers, activity stations, outdoor walking paths and sensory gardens.
The floor designated for memory care will feature access to an enclosed outdoor courtyard and tall, circular hallways that enable residents to safely explore their surroundings. Staff members will be specially trained in managing the psychological and safety needs of Alzheimer’s patients and other residents with dementia.
It has been reported that investors are buying office buildings that promise reliable rental streams. The same can be said for a property type that doesn't always get much respect -- self-storage units.
MJ Partners Principal Marc Boorstein arranged the sale of four such facilities in the Chicago area to a private investor from New York. The asking price was $11.8 million for properties encompassing about 260,000 square feet, including some warehouse space.
The portfolio generated bids from 14 different parties nationwide, demonstrating renewed interest in the market for income-producing commercial properties," Boorstein said. The seller was Australia-based Babcock & Brown. Three of the properties are near Midway Airport: 4821 W. 67th St., Bedford Park; 7131 W. 60th St., and 4222 S. Pulaski. The fourth is at 200 Parkway Drive, Lincolnshire.
Boorstein also is marketing four more self-storage facilities in Chicago and Cicero on behalf of seller JPMorgan Chase & Co. He said 80 percent of the space is occupied and the asking price is $15 million.
INDUSTRIAL SALE: An Indianapolis-based investment group, Scannell Properties LLC, bought 33 acres in the Grayslake Business Park southwest of routes 83 and 137 in Grayslake. It plans to build a 215,000-square-foot distribution center for FedEx. Property records showed Scannell paid $6.24 million to seller Delos Inc. Paine/Wetzel Oncor International represented Delos in the sale and is marketing 100 other acres in the park. The property has a unique selling point: It can take methane gas from a nearby landfill and convert it into heat or electricity for its buildings.
CALENDAR NOTE: Friends of Downtown hosts Rachel Weber, associate professor of urban planning at the University of Illinois at Chicago, who'll talk about tax-increment financing districts and their impact. The free program is at 12:15 p.m. Thursday at the Cultural Center, 78 E. Washington.
DOING THE DEALS: Select Marketing Solutions Inc. leased 60,000 square feet at 1175 Lakeside Drive, Gurnee, with CB Richard Ellis Group Inc. and HSA Commercial the brokers. . . . Christopher Hill, former planning commissioner for Mayor Daley, and David Ariola, onetime member of the city's Community Development Commission, have merged their firm, Chicago Realty Co., with Daccord Group, run by Len Skiba. The new firm, CR Daccord, promises a boutique approach to brokerage and development. . . . Chicago Messenger leased 38,000 square feet at 1120 W. Exchange in a relocation from 1600 S. Ashland. Paine/ Wetzel Oncor International handled the deal. . . . After more than 50 years in Des Plaines, Arthur J. Rogers & Co. real estate has moved its headquarters to 1559 Elmhurst Road, Elk Grove Village. It sold its former property, 3170 Des Plaines Ave., for the suburb's new casino.
DTZ, which acquired Cassidy Turley in January, may be looking to buy Cushman & Wakefield for $2 billion, Commercial Property Executive reports. Business Insider names 25 retail companies that are revolutionizing the industry. Bentall Kennedy financed its acquisition of 757 Third Avenue with a $205 million loan with a term of 15 years from New York Life Real Estate Investors, according to Commercial Observer. These are among today's must reads from around the commercial real estate industry.
Businesses are showing their confidence in the economy in early 2015, actively seeking growth and space expansion. Though national office fundamental growth crawled even slower in the first quarter than in previous months, it’s clear the industry’s reset button has been hit hard, experts say, and the next three years should beat records for quick rent growth and absorption.
The Real Deal speculates on what the Chinese mega-developer Kaisa's default means to New York's real estate and finance industries. Brookfield Asset Management has bought Associated Estates Realty Corp. for $2.5 billion in cash, reports Commercial Property Executive. The Wall Street Journal reveals that investors are pouring more money into real-estate funds than ever since the downturn. These are among today's must reads for the commercial real estate industry.
With new development no longer on hold due to a renewed flow of equity capital and low-cost debt financing, the hotel market is revving up across the country. Meanwhile, yields are being compressed, and investors are favoring new development. NREI spoke with Joshua Emory, a principal with Primrose Capital in Miami, about how the U.S. hotel capital markets are faring.
In the net lease world, Walgreens has ranked as the most desirable retail asset for decades. Investors like the chain’s dominant position, long-term leases, and investment grade credit. The recent announcement that Walgreens plans to close 200 U.S. stores won’t diminish investor interest, but it will compel investors to be more thorough in their due diligence, net lease experts say.
A $1.7 billion privately financed stadium for the San Diego Chargers and Oakland Raiders was approved by Carson City in California, the Los Angeles Times reports. Target's latest designer collaboration with Lilly Pulitzer is such a success that it's simultaneously infuriated customers and boosted sales, according to Business Insider. The major players in the U.S. single-family home sector plan to raise rents by up to 5.7 percent this year as they shift focus from buying properties to boosting their bottom lines, reveals Bloomberg. These are among today's must reads from around the commercial real estate industry.
After health care REIT Ventas Inc. acquired hospital company Ardent Medical Services Inc. and an affiliate for $1.75 billion in cash earlier this month, Ventas’ shares jumped to $76.90, the highest they’ve been since October 2011. NREI spoke with Ventas CEO Cafaro about what was behind the deal and what Ventas hopes to gain from it.
Target's hasty exit from Canada has left scores of empty retail space among shopping centers there, the New York Times reports. Chicago has become the fastest-growing city for tech companies and tech jobs, topping even Silicon Valley, according to Crain's Chicago Business. Blackstone Group LP and Brookfield Asset Management Inc. are said to be among bidders for $7 billion in Australian real estate being sold by Morgan Stanley’s Investa Property Group, Bloomberg reveals. These are among the must reads from around the commercial real estate industry today.
The multifamily and industrial markets in Minneapolis/St. Paul are thriving. Just look at the number of construction cranes and spec warehouses being built in the Twin Cities area today. But the office market in the Twin Cities is actually enjoying a quiet resurgence, too. And that's good news for anyone hoping for busy times for commercial real estate in 2015 and beyond.
Unit P11 at 2700 N Halsted is a bright corner 1-bedroom with high ceilings, hardwood floors, a private balcony, a beautiful kitchen, central air, heated garage parking and more. It’s in an elevator building with a fitness room and a roof deck with great skyline views. The home has just been listed for sale at [...]
The leasing office and four furnished models are now open at Jeff Jack, a new West Loop apartment tower at 601 W Jackson. JeffJack is offering a month’s free rent on 1- and 2-bedroom apartments. Apply within 24 hours of your first visit and receive a discounted rate of $199 on reserved monthly parking. The [...]
Atwater, a luxury apartment tower in Streeterville, is barely 6 years old but it’s upgrading its apartments and amenities and has recently opened two new furnished models to showcase the changes.. One of the models, Unit 2701, is a corner 2-bedroom, 2-bath with floor-to-ceiling windows, a split-bedroom layout and a sheltered private balcony with lake [...]
One of the many advantages of renting in a new apartment community is having a wide selection of homes on different floors with different views. That’s especially appealing when you’re seeking a type of apartment that’s scarce in your preferred neighborhood. The recently-opened 52-story North Water apartment tower in Streeterville has eight different studio and [...]
Parc Huron is a luxury apartment tower in a quiet residential pocket of River North – and just a 5-minute walk from the offices of Groupon, Dyson, TD Ameritrade and other major employers at 600 West. Parc Huron has a full suite of amenities, service-oriented on-site leasing and management staff and 24/7 door staff. The [...]
Soul Cycle recently opened at the retail level of the 1225 Old Town apartment tower, joining the upscale Plum Market and Intelligentsia Coffee in the building. 1225 Old Town raffled a free ticket to a $1,000 per person fundraising event at Soul Cycle for the Born This Way Foundation. Lady Gaga headlined the event, which [...]
Parc Huron in River North, is offering a month-and-a-half free rent on select one-bedroom apartments for leases beginning before April 30. All of the apartments at Parc Huron have balconies or walk-out terraces, and east-facing ones have spectacular skyline views. Chestnut Place, 850 N State, is offering a month’s free rent on newly-renovated vacant apartments. [...]
E2 Apartments in Evanston is special in very many ways. Here are a few: E2 is Evanston’s newest apartment community. E2 is Evanston’s largest apartment community. E2 is Evanston’s only two-tower apartment community. E2 is one of only two Evanston apartment communities with 24/7 door staff. E2 has the only basketball court in an Evanston [...]
Until Halsted Flats opened just over a year ago renters had to take a regretful pass on Lakeview if they wanted to live in a full-amenity, pet-friendly high-rise with luxury apartment finishes. Halsted Flats residents enjoy a sprawling landscaped pool deck with a whirlpool, multiple seating areas and gas grills. A resident lounge and demonstration [...]
You’ve heard that Whole Foods has opened its new West Loop store at 1 N Halsted St, three short blocks east of the new apartments and lofts at Circa 922. Whole Foods is the new kid on the block, but there’s an old kid on the same block as Circa 922: JJ.P. Graziano Grocery. Graziano’s [...]