Cole Real Estate Investments, a diversified real estate company, has acquired The Hillshire Brands Company’s headquarters in the West Loop of Chicago’s CBD on behalf of Cole Corporate Income Trust Inc. for $97.5 million.

The 233,869-square-foot headquarters facility was recently redeveloped by Sterling Bay Cos, which entered into a long-term net lease with Hillshire. The build-out included a complete restructuring of the infrastructure and building components, plus windows were added on all four exposures to increase its natural light.

“The Cole philosophy for single-tenant acquisitions remains consistent: we look for high-quality, income producing commercial real estate in strong markets, leased to creditworthy tenants under long-term leases,” Boyd Messmann, Cole’s senior vice president of office and industrial acquisitions, told Commercial Property Executive. “The Hillshire Farms headquarters property fits our criteria.”

According to Messmann, the West Loop submarket of the Chicago Central Business District is an emerging Chicago neighborhood that provides excellent visibility and accessibility with ample nearby public transportation. The building is one of the only Class A, single-tenant office buildings in the entire area.

“The Hillshire Brands Company headquarters is a mission-critical property in a great location. The property was recently redeveloped with new infrastructure and building components, and was the 2012 NAIOP Chicago Award for Excellence winner for office redevelopment of the year,” Messmann said. “When you factor in its long-term 15-year lease with an investment-grade tenant such as Hillshire Farms, this was an attractive acquisition for Cole.”

The transaction brings CCIT’s investment portfolio to 27 wholly owned properties in 15 states, totaling approximately 4.6 million square feet with a purchase price of approximately $731.1 million. More than 65 percent of CCIT’s portfolio consists of tenants rated by Standard & Poor’s, and of those tenants more than 88 percent are rated investment grade.

Additionally, the weighted average remaining lease term is nearly 11 years and the overall average credit rating of the rated tenants in the portfolio is A-.

“Cole continues to see development and tenant expansion increase in markets nationwide, which may lead to more supply for the remaining year and beyond,” Messmann concluded. “Our portfolio management team continues to focus on identifying and acquiring fundamentally strong properties with recognized tenants in markets across the United States.”

Surging demand, new retail concepts and stirrings of new development were the talk of the Las Vegas Convention Center on Monday during the first day of RECon, the International Council of Shopping Centers’ annual spring convention. It is impossible to tell how many deals will emerge from the event, but as thousands of real estate professionals roamed the vast halls of the 3.5 million-square-foot facility, participants reported a sense of renewed optimism about the market.

“Going into the show, we have more meetings this year than last year,” said John Bacon, vice president of marketing with Cole Real Estate Investments. As of Monday morning, the firm’s acquisition team had scheduled about 240 meetings and the leasing team had about 110 meetings on the calendar. “Our leasing people were getting calls as late as Friday night” from attendees hoping to schedule meetings at the last minute, Bacon added.

Conversations with a variety of attendees revealed optimism fueled by stepped-up interest in investment sales, leasing and development. “The net-lease industry as a whole is hot,” said Stan Johnson Co. managing director Harold Briggs Monday morning at the firm’s booth in the convention center’s south hall. The company’s net-lease retail transaction volume posted a 50 percent year-over-year increase during the first quarter, outperforming the company’s office and industrial sales growth by a considerable margin. One noteworthy net-lease retail trend is the participation of institutional investors, particularly in the $50 million to $100 million range, Briggs reported. “You’ll see five or six institutional buyers compete for portfolios of 15 to 20 assets,” he said.

Owners exhibiting at the show confirmed on Monday that renewed tenant interest is pushing them to adjust their tactics. Scott Prigge, senior vice president of property operations for Regency Centers Corp., said that pet supply stores, fitness centers and fast-casual restaurants are leading the way. Quick-Service restaurants, said Prigge, “can’t get enough space.”

Underscoring his point, a variety of fast-casual restaurant brands like Subway, Smashburger and Jersey Mike’s are using RECon as a bully pulpit to bring attention to their expansion programs and identify suitable space for new locations. Demand for space in desirable locations has improved to the point that Regency aims to backfill a vacant space with the best possible tenant. This year the company is also rolling out a company-wide campaign to review best practice in customer service.

Other restaurant niches besides are commanding the attention of RECon attendees. Chef-driven restaurants are catching on, especially as part of redevelopment in core urban areas that appeal to members of Generation X and Generation Y, according to James McCandless, director of retail for Streetsense, a diversified Bethesda, Md.-based consulting, design and development firm that is a member of the X Team network of service providers and consultants. Another X Team member, Legend Retail Partners, recently rolled out its new Urban Legend affiliate in an effort to tap into the growing chef-driven restaurant market, reported Legend partner David Larson.

In the second and third major moves in less than a week, Ares Commercial Real Estate Corp., Chicago, has agreed to acquire EF&A Funding L.L.C. (d/b/a Alliant Capital L.L.C.) for about $62.8 million in cash and stock and has also named a new co-CEO, Todd Schuster, the REIT announced Wednesday.

Alliant Capital L.L.C. will become a wholly owned taxable REIT subsidiary of ACRE. (Alliant Capital Ltd., which provides affordable housing tax credit equity, is not included in the acquisition and will remain a part of The Alliant Co.)

Alliant Capital L.L.C. focuses on lending, asset management and servicing in the multi-family sector and specializes in the origination and servicing of multi-family loans through the Fannie Mae DUS program. Its servicing portfolio is about $3.9 billion in multi-family loans with mortgage servicing rights at a fair value of about $61.0 million.

In addition, Alliant Capital L.L.C. recently was approved to originate loans insured by the Federal Housing Administration and to securitize those loans through Ginnie Mae.

Schuster’s appointment as co-CEO of ACRE, where he joins existing CEO John Bartling Jr., clearly is connected to the Alliant Capital acquisition, because Schuster is a board member of an affiliate of Alliant Capital L.L.C., as well as a current ACRE board member.

“As a leading commercial real estate finance CEO, Todd’s significant insights in running GSE and FHA/Ginnie Mae platforms will be invaluable to the success of this acquisition,” Bartling said in a release.

Schuster was the founder of CW Financial Services and its CEO from 1991 to 2009.

Through a spokesperson, Ares declined to comment further on either action.

These moves are hard on the heels of last week’s announcement by ACRE parent Ares Management L.L.C., Los Angeles, that it would purchase AREA Property Partners, essentially quadrupling Ares Management’s total committed capital, to $8 billion, once AREA’s real estate equity investments in North America and Europe are added.

The Alliant Capital acquisition, Bartling said “will enable ACRE to better meet the short- and long-term financing needs of multi-family owner/operators in an asset class that has performed well over the long-term, especially in the past five years.”

It’s reportedly expected to benefit ACRE shareholders in several ways.

* Alliant Capital L.L.C.’s national direct origination platform focused on Fannie Mae and FHA/Ginnie Mae multi-family loans scales up ACRE’s platform and enhances its direct origination capabilities.

* The addition of Alliant Capital L.L.C.’s focus on long-term multi-family GSE loans to ACRE’s background in providing multi-family bridge loans will let ACRE offer “a complete turnkey financial solution for multi-family owners/operators seeking short- and long-term financing options.”

* Adding Alliant Capital L.L.C.’s $3.9 billion servicing portfolio (about 1,000 loans) diversifies ACRE’s revenue stream.

A $118 million, 16-property office portfolio fully leased to federal agencies through the Government Services Administration is on the market and attracting  interest from both U.S. and international buyers.

“This is getting a lot of attention and a lot of discussion,” Colin Cavill, a member of Colliers International GSAXCHANGE group that is marketing the 273,000-square-foot portfolio for West Second Street Associates, told Commercial Property Executive.

Cavill, managing director of Colliers International’s GSAXCHANGE, said the size of the portfolio is unusual in the GSA space.

“This is a very rare opportunity to pick up a portfolio that has geographic and tenant agency diversity in this space,” he added.

The properties are occupied by GSA tenants including the Social Security Administration, Internal Revenue Service, Immigration and Customs Enforcement, Department of Veterans Affairs and Customs and Border Protection. Seven of the properties are in Michigan; three in Ohio; two each in Florida and Texas and one each in Colorado and Minnesota. They were all build-to-suit and the oldest was built seven years ago. Two are still under construction but close to completion. The properties range in size from 6,000 to 40,000 square feet. The remaining average lease term is 10 years.

Cavill said the ongoing sequestration affecting the federal government budget does not affect these properties.

“Because these are long-term leases that have firm terms, there is not going to be any disruption of the rents,” he said.

Cavill said the GSA properties attract investors because they “provide a steady income stream and consistent yields.”

He told CPE that WSSA, a Flint, Mich.,-based developer and long-term property manager that specializes in GSA buildings, was selling the portfolio to redeploy the capital into other parts of its business.

But he added, “They’re not getting out of the GSA market.”

Cavill said the portfolio had been marketed for about two weeks, both inside and outside the U.S.  He expects bids to be submitted by May 21.

“We hope by early summer it will be closed,” he said.

The federal government is the largest single occupant in the U.S., leasing or owning more than 3 billion square feet of real estate. GSAXCHANGE, which is part of Colliers Government Solutions, is an investment sales and capital markets platform that deals solely with government-leased assets. Joining Cavill on the WSSA portfolio team are Bob Cottle and Darrin Kennedy.

“WSSA selected Colliers Government Solutions because of the deep federal-sector knowledge we provide, enabling us to better market the positive attributes of this portfolio,” Kurt Stout, executive vice president, Government Solutions at Colliers Internationl, said in a news release. “We are thrilled to have this opportunity to represent such a large portfolio of GSA properties, and look forward to expanding our presences in several strong markets.”

The Colliers Government Solutions platform consists of six services focused on government real estate: leasing, investment sales, finance, property management, appraisal and tax appeal. Members of the group work in teams to provide clients with solutions to deal with the often complex requirements of government-leased properties.

A new breed of high-rise architecture is in the process of being born, thanks to the collaborative efforts of modern design pioneers. Envisioned as the best sustainable option for meeting world housing demands and decreasing global carbon emissions, wooden mega-structures are now one step closer to becoming a reality.

Photo credit: eVolo

“Big Wood,” a conceptual project submitted by architect Michael Charters to the eVolo 2013 Skyscraper Competition, builds on the premise that wood, when harvested responsibly, is one of the best tools architects and engineers have for reducing greenhouse gas emissions and creating healthy communities. Aspiring to become one of the greenest skyscrapers in the world, Big Wood challenges the way we build our cities and promotes timber as a reliable platform to support tomorrow’s office and residential towers.

Whereas the building industry accounts for 39 percent of man-made carbon emissions, according to the eVolo architecture and design journal’s announcement of Charters’ honorable mention win, timber emerges as a greener alternative to standard structural systems. In addition to its eco-friendly properties, timber is technically and economically competitive compared to steel and concrete, and can be employed in a broad range of building structures. “Recent studies have proved the success of 20- to 30-story mass timber structures,” according to eVolo,  while the use of hybrid systems would enable developers to go even higher with their projects.

Combining technological advances with conservation and sustainability features, Big Wood stands out as a masterpiece of modern engineering. It is a prototype on mass timber construction that offers the possibility to build more responsibly while actively sequestering pollutants from our cities.

To be developed along the Chicago River in the Windy City‘s South Loop neighborhood, the mixed-use university complex is built on a mass timber system. In yet a further sustainable step, the lumber used is not just locally grown and milled but the South Chicago tree farm from which it was obtained is on a remediated brownfield site that once sheltered the South Works steel mill and now bvenefits the entire area by extracting toxins from the soil as well as carbon dioxide from the air.

The astounding high-rise features three different housing types, retail, a library, a media hub, a sports complex, parking, as well as a community park and garden.

“Known as the birthplace of the skyscraper, Chicago is an optimal location for a prototype in mass timber construction,” writes Carlos Arzate in his description of the project in eVolo. “Similar to the rapid innovation in building technology that occurred in the early 1900s, ‘Big Wood’ is positioned to be a catalyst for a new renaissance in high-rise construction, forever changing the shape of our cities.”

Widely recognized thanks to the architectural efforts of Michael Green, a progressive architect who plans to erect a 30-story wooden skyscraper in Vancouver, the groundbreaking concept strives to address the major challenges of climate change, urbanization and sustainable development. In collaboration with structural engineer Eric Karsh, Green developed a mass timber panel approach solution for tall buildings called FFTT (Finding the Forest Through the Trees), which is adaptable to various architectural forms, including office and residential uses.

Dentons, the world’s seventh-largest law firm, has extended its lease in Willis Tower for 15 years. The global law firm, formerly known as Sonnenschein and more recently as SNR Denton, is relocating within the building and taking up to 144,000 square feet of new space.

“Dentons is one of the building’s longest-standing tenants and its extension shows the significant value that the law firm and others see in the building,” Mike Kazmierczak, senior vice president of leasing for U.S. Equities Asset Management, told Commercial Property Executive. “Dentons knows everything about Willis Tower; its operations, management, location, amenities and infrastructure. Even after being heavily pursued by other properties, Dentons’ decision to remain in the building after so many years is a testament to Willis Tower’s market position as a leading environment for business.”

The extension bolsters Willis Tower’s standing as a prominent hub for global commerce as it continues to meet the demanding needs of today’s leading businesses. According to Kazmierczak, when Willis Tower was built by the Sears Corp., it was engineered and designed in a way that has allowed it to stand the test of time.

“It remains, from a technology and infrastructure perspective, competitive with today’s newest buildings,” he said. “As a result, Willis Tower is able to serve and easily adapt to the needs of a full spectrum of companies from large corporations to the world’s leading law firms to leading tech companies.”

The new lease will mean brand new space for the firm, to be built out before the move. Dentons will remain in its current space in the building until the new space is completely built out. Mary G. Wilson, managing partner of the Chicago office of Dentons, cited Willis Tower’s flexibility, efficient floor plates and superior amenities as primary factors in the decision to remain in the building.

“Willis Tower meets the technology, infrastructure and location needs of our global law firm,” she said in a company statement. “We evaluated dozens of alternatives and concluded that reinventing our physical space within Willis Tower will best meet the needs of our professionals and clients.”

Willis Tower’s ownership has positioned itself to actively lease the building both with renewals and new tenants. And, based on recent deals that have closed, the flexibility Willis Tower offers is a positive attraction for tenants of all sizes.

“This particular lease extension speaks to the fact that Willis Tower goes above and beyond to provide the best business environment, amenities location and services for existing and prospective tenants,” Kazmierczak said. “It is significant when any new tenant decides to move into the building, but it sends an even stronger message when a long-term tenant explores the market and decides to stay.”

Willis Tower completed more than one million square feet of leasing in 2012. United Airlines expanded its lease by moving its global headquarters to the building, where it had already had built out its operations hub. Another headquarters move into Willis Tower is ShopperTrak, a retail technology company. Other recently signed deals include companies like eTrade. 

Kazmierczak said that all of these recent developments speak to the building’s intensely creative management and ownership group continuing to provide the latest amenities. For example, the building recently made headlines for offering the city’s first bike valet program at a commercial building. This action builds on the innovative spirit inherent in other building investments like the introduction of Willis Tower Skydeck’s The Ledge, a signature Chicago visitor experience, which exceeded 1.6 million visitors last year.

Jim McGill, Prologis senior vice president

Prologis Inc., of San Francisco, has signed a build-to-suit agreement with Subaru of America for a 715,000-square-foot distribution center in the Indianapolis area, the developer announced Wednesday.

The state-of-the-art, cross-dock facility will be built at Prologis Park Lebanon, near major freeways and the Indianapolis International Airport, and will serve as a regional parts distribution center. The project’s price was not disclosed.

“The record low supply of large industrial facilities continues to drive build-to-suit solutions in many markets around the country, including Indianapolis,” Jim McGill, Prologis senior vice president, said in a release. “With occupancies rising for the past two years, Indianapolis remains a compelling regional market.”

“Subaru has been setting sales records for the past five years, and we are structuring our operations to reflect that,” Gary Palanjian, Subaru of America vice president of parts and service, said in the same release. “This new facility allows us to better serve our retailers, as well as support our growing operations at our manufacturing plant in Lafayette, Ind.”

Prologis Park Lebanon is a 56-acre parcel that Prologis bought in 2003, McGill told Commercial Property Executive. Despite its being designated as a park, he added, the Subaru of America distribution center will be the sole development there.

McGill added that at least in the central region (Texas up through the Midwest), the shortage of available distribution facilities 500,000 square feet and larger is among the factors driving the BTS market. He added that a 145,000-square-foot building on which Prologis broke ground in September 2011 was the company’s first spec building since the recession.

With demand softening recently among larger users in markets like Chicago, Dallas–Fort Worth and Indianapolis, McGill said, demand is shifting to older properties and mid-market customers. Still, he said, absorption numbers are looking good in almost all of the region’s major markets.

Prologis has seen a spate of sizable BTS deals in recent months. Though McGill believes that the industrial market, like the overall economy, is on the way back up, he characterizes this flurry of activity as a “blip.”

Just so far this year, Prologis has signed four major BTS deals.

* On March 25, it announced that it would build a 770,000-square-foot distribution center in Pataskala, Ohio, near I-70 just east of Columbus. The client is SpeedFC, a provider of e-commerce services. 

* On Feb. 13, Prologis signed two BTS agreements, totaling 609,000 square feet, with BMW of North America. One building, of 326,500 square feet, will be built at Prologis Redlands Distribution Center 11, in California’s Inland Empire submarket. The second, at Prologis Park 20/35 in the Dallas market, will be 282,000 square feet initially, with expansion capabilities to 370,000 square feet. 

* And on Jan. 22, Prologis nailed down an agreement with Amazon.com for a more than 1 million-square-foot fulfillment center at nearly 90 acres at Prologis Park Tracy Phase II, in Tracy, Calif.

Equus Capital Partners, Ltd., a private equity real estate fund manager, has sold a 330-unit student housing facility in Chicago for $58.5 million to a joint venture of Atlas Real Estate Partners, Marc Real Residential and Angelo, Gordon and Co.

“Equus has a 25-year history as a value-add owner/operator, so when we purchased this property in 2003 we immediately initiated a strategy of converting this conventional market-rate apartment building into an 882-bed student housing community,” Greg Curci, vice president at Equus, told Commercial Property Executive. “This conversion to student housing led to an immediate increase in NOI.”

Located at 2 East 8th St., in the heart of Chicago’s South Loop, the 28-story high-rise facility is proximate to Columbia College, Roosevelt University and more than 20 other schools. It’s comprised of 882 beds and includes 20,000 square feet of first floor retail and a four-story parking garage.

During its ownership, Equus executed a number of significant capital improvement, which allowed it to secure a five-year master-lease with Columbia College for 60 percent of the beds.

“This helps provide a degree of stability to the property’s income, which helps take some burden off of the leasing teams and makes the property more financeable,” Curci says. “Not many master-lease secured student housing communities come available in the core of first-class cities like Chicago.”

According to Curci, student housing has fared very well in this market and he doesn’t believe the current sequester will have any effect on the student housing market.

An affiliate of Equus acquired 2 East 8th Street as part of a three-property portfolio in 2003. In this sale, the seller was represented by Chris Bancroft and Chris Epp of ARA Student Housing Group and Susan Lawson and Todd Stofflet of ARA Chicago.

At the time of sale, the property was 96 percent leased.

Equus’ portfolio now consists of more than 24 million square feet of office, retail, student housing, and industrial properties and nearly 18,000 apartment units in more than 70 communities located throughout the United States.

Burnham Center

Alliance Partners HSP L.L.C. has acquired downtown Chicago’s 580,000-square-foot Burnham Center office building from Harbor Group International for $94.6 million. Alliance, the East Coast arm of real estate firm The Shidler Group, sealed the deal just five months after the historic property hit the market, and six years after HCI paid $79.5 million for the asset. 

The lending community looked kindly upon Alliance’s pursuit. “There were many lenders interested in providing financing for Burnham Center, with a heavy concentration of CMBS capital sources,” Ian C. Russell, a vice president with commercial real estate services firm Jones Lang LaSalle, told Commercial Property Executive. JLL marketed the asset on behalf of the seller and orchestrated acquisition financing for Alliance. “Lenders were attracted to Alliance’s strong reputation, the quality and location of the asset, improving fundamentals of the Chicago leasing market and the upside potential for the Sponsor to improve the value of the collateral through active asset management.”

Carrying the address of 111 W. Washington St., the 22-story tower has been part of the Chicago skyline since 1914 and carries the distinction of being one of the last existing buildings designed by celebrated architect Daniel Burnham. While it holds a spot on the National Register of Historic Places, Burnham Center, isn’t showing its age, having undergone a major renovation in 1985 and, recently, a $4.2 million capital improvement program. And Alliance has its own plans for upgrading the property as it looks ahead to a long-term hold. 

Burnham Center is home to a bevy of notable tenants. Tribeca Flashpoint Media Arts Academy occupies more than 100,000 square feet; Cook County claims nearly 65,000 square feet and online food ordering service GrubHub relocated its headquarters to a 60,000-square-foot space in the building in 2012. However, there is room for more, as the building is only 75 percent occupied. Alliance has tapped JLL to spearhead leasing.

Omni Hotels Corp. has gotten its hands on a total of $250 million in financing for a group of three properties encompassing the Omni Fort Worth, Omni Houston and Omni Chicago. The hotel company relied on commercial real estate and capital markets services provider HFF to arrange the loan, which was provided by Prudential Mortgage Capital Co.

Prudential was just one of many lenders eager to provide financing for the premier hotels. “The transaction was very well received, and there was a diversity of lender types,” Whitaker Johnson, a senior managing director with HFF, told Commercial Property Executive.” 

The three properties are among the leading hotels in their markets. The 614-room Omni Fort Worth made its debut in 2009, sprouting up just across from the 400,000-square-foot Fort Worth Convention Center. Four hours to the south, the 378-room Omni Houston, part of Omni’s portfolio since 1992, provides 378 guestrooms in the Houston’s coveted Galleria/Uptown submarket. And in the Windy City, the 347-room Omi Chicago, which was a Hyatt Regency property before Omni acquired and converted it in 1993, offers a location at the core of the Magnificent Mile.

“I think the quality of these assets and the quality of the sponsor was the primary reason it was well received by the market,” Johnson said. “The premium that is typically associated with hotel financing was virtually non-existent in this transaction.”

The deal dovetails with experts’ capital markets predictions for 2013. According to PwC’s annual Emerging Trends in Real Estate report: “In the debt markets, it will be ‘more of the same’–good assets with solid income streams and good credit borrowers will have no trouble attracting financing from life insurers and banks eager to choose from the pick of the litter.”