Slate Office REIT Snags Chicago Office Building for $156M

The Toronto-based company acquired the 23-story 120 S. LaSalle and also entered into an agreement to sell a group of Water Street properties in St. John’s, Newfoundland for $17.5 million.
120 South LaSalle
120 S. LaSalle

Slate Office REIT has acquired 120 S. LaSalle, a 656,080-square-foot office building in Chicago, and an adjacent parking garage for $155.5 million. According to Yardi Matrix, the property’s previous owner was Lincoln Property Co.

“We are very excited to announce our second U.S. acquisition of 2018,” Scott Antoniak, Slate Office REIT’s CEO, said in a prepared statement. “120 South LaSalle is a landmark downtown Chicago address and is the U.S. headquarters of CIBC Capital Markets, a leading Canadian-based global financial institution and a key strategic financial partner of Slate Office REIT.”

Earlier this year, the Real Deal reported that Lincoln Property Co., in a joint venture with the Illinois Teachers’ Retirement System, hired CBRE to market 120 S. LaSalle for sale.

Completed in 1928 and fully renovated in 1998, at 23 stories, the building currently stands 84 percent occupied with a weighted average lease term of 10.4 years. The property is anchored by CIBC Capital Markets, which utilizes 45 percent of the leaseable space.

120 South LaSalle
120 S. LaSalle

According to Antoniak, the appeal of the building for the REIT was the cash flow growth opportunities from contractual rental increases, near-term leasing opportunities and rents that are around 21 percent below market. That created a great opportunity to enhance value via a re-imagined amenity offering, retail repositioning and office lease-up.

Additionally, the building is close by 20 S. Clark, a 30-story, 400,291-square-foot office building that is another of the REIT’s assets, helping the company with operating, leasing and marketing synergies.

Making Moves

The REIT also agreed to sell 139 Water St., an 84,058-square-foot office building, along with the Water Street Properties in St. John’s, Newfoundland for $17.5 million.

The sale is being completed thanks to $14.8 million of cash and a vendor-take-back loan in the amount of $2.7 million. Secured by the Water Street Properties, the vendor-take-back loan bears interest at 8 percent and will mature in August 2020.

Both transactions are subject to customary closing conditions and are expected to be finalized in the third quarter of 2018.

In March, Slate Office REIT paid $191.4 million to acquire a portfolio of seven properties in Greater Toronto and Atlantic Canada. The seller of the assets, which total nearly 1 million square feet, was Cominar Real Estate Investment Trust. 

According to the company, the REIT plans to initially use the net proceeds from these deals to decrease outstanding debt, which may be redrawn to fund future acquisition activity.

Images courtesy of Yardi Matrix