Sterling Bay Buys Chicago Office Tower for $510M
- Feb 26, 2018
Sterling Bay just boosted its Chicago office footprint by 1.6 million square feet in one fell swoop. In partnership with institutional investors advised by J.P. Morgan Asset Management, the real estate developer and investor acquired the noted office property at 600 W. Chicago Ave. from Equity Commonwealth in a deal valued at $510 million.
“This purchase marks an exciting milestone in our firm’s growth and expansion,” Andy Gloor, managing principal with Sterling Bay, said in a prepared statement. Milestone, indeed. The half-billion-dollar transaction constitutes Sterling Bay’s largest purchase in the 22-year-old firm’s history.
600 W. Chicago is quite a catch. Originally constructed in 1908 as a catalog warehouse for department store Montgomery Ward, the building was redeveloped into an office destination in 2001. Today, the curving waterfront structure is 94 percent leased to a host of office and ground-level retail tenants and is a veritable tech-tenant hub, with the likes of online coupon giant Groupon maintaining its headquarters at the property.
Sterling Bay plans to work with tenants to further modernize 600 W. Chicago, while maintaining the architectural integrity of the property, which is listed on the National Register of Historic Places.
A big deal all around
The change of ownership at 600 W. Chicago is not just a momentous transaction for Sterling Bay. For Equity Commonwealth, which had acquired the property for $390 million in 2011 when it was operating as Commonwealth REIT, the disposition leaves the REIT with just one Chicago office property in its once-vast portfolio in the city. Since 2014, Equity Commonwealth has completed dispositions totaling more than $5 billion, and the company has plans for those proceeds.
“As we’ve discussed previously, we have positioned the company to grow significantly if we can source an appropriate investment opportunity,” David Helfand, president & CEO of Equity Commonwealth, said during the company’s third quarter 2017 earnings conference call on October 25, 2017. “If we’re unsuccessful in that pursuit, our plan is to continue to sell assets at prices in excess of the value implied by our trading price.”
Images courtesy of Sterling Bay