Chicago News

601W Cos. Buys Old Post Office

GlobeSt.com | ARTICLE BY Brian Rogal
March 18, 2016

CHICAGO—The significance of this sale is unclear. City officials seem determined to use the eminent domain process to assume control and have already issued an RFP.

CHICAGO—Another developer may get a shot at tackling one of the biggest question marks in the city’s downtown. Bill Davies’ International Property Developers North America announced yesterday a conditional sale of the Old Post Office, the iconic 2.7 million square foot property that straddles the Eisenhower Expressway, to New York-based investment group 601W Cos. It is still not clear whether the deal will survive, as city officials seem to have other ideas.

Earlier this week, after losing patience with Davies’ unsuccessful attempts to cobble together a workable plan since acquiring the site in 2009, the city’s Department of Planning and Development issued a RFP for the property with proposals due June 10. Officials want to take over the site through the eminent domain process, identify a company willing to buy it for fair market value and then transform it into an office or mixed-use project. Davies’ sale was announced the day after the RFP was issued.

“I think the obvious thing is that the city will, I’m sure, respect the contract,” Richard Sykes, a consultant with Savills UK who represented IPDNA, told GlobeSt.com. He pointed out that 601W Cos. has built up a formidable reputation as a firm that can take over and revive aging properties. It bought the Starrett-Lehigh building in New York, for example, a 2.3 million square foot Art Deco landmark, “and turned it around in a short space of time.”  

The company also owns Chicago’s One Prudential Plaza and has transformed the 60-year-old tower into a sleek modern office space with a host of new amenities. And in 2014, it purchased the 2.15 million square foot Southfield Town Center, perhaps the most recognizable office complex in suburban Detroit, for $177.5 million, even though it was only 67% occupied at the time. In all, 601W Cos. has acquired and repositioned more than 40 million square feet of trophy office assets within the US. It also owns other Chicago properties including the giant Aon Center and 111 W. Jackson.

IPDNA went through a long process before settling on 601W Cos. In late 2014, IPDNA brought in Savills to seek a joint venture partner or purchaser. In the subsequent 18 months Savills gave presentations in China, Japan, South Korea, Malaysia, the Middle East and Europe as well as throughout the US and Canada.

Serious negotiations with 601W Cos. began in May 2015 and the parties signed a contract of sale this week. The companies did not disclose the sale price or whether Davies’ firm will still play a role in the redevelopment.

City officials “only knew about it on Tuesday,” Sykes said. “It would have been nice to do it a week before,” but it took a few more days to finalize the deal. The looming threat of the RFP “had no impact whatsoever” on the negotiations. 

Asked whether he expects the city to now withdraw the RFP, Sykes said, “it’s not for me to comment on. But 601W has every intention of moving forward.”

The city’s response perhaps sets the stage for a battle in court. “The city is going forward with the RFP as planned,” Peter Strazzabosco, deputy commissioner of the planning department, told GlobeSt.com. The city will hold a pre-submittal conference on April 14, and “potential developers are strongly encouraged to respond.”

Along with Sykes, Lisa Davidson and Tiffany Winne of Savills Studley represented IPDNA; 601W Cos. was represented by Jaime Fink and Jeff Bramson of HFF.

 

Portillio Backed Firm Pays $139 Million for Single Tenant Buildings

A new Chicago venture whose investors include hot dog baron Dick Portillo paid $139 million for 48 single-tenant retail buildings, including seven in the Chicago area.

BlueRoad Ventures said it bought the portfolio last month from Brauvin Net Lease, a privately held real estate investment trust managed by Chicago-based Brauvin Real Estate.

It was the first acquisition for BlueRoad, an asset management and investment firm launched in the fall, said Managing Partner Tim Farrell.

“The diversity of the tenant mix and locations offers long-term value for our investors,” Farrell said. “We’re aggressively growing our portfolio and looking for opportunities throughout the country.”

BlueRoad is seeking retail and office properties with long-term leases in place and large vacancies to fill, Farrell said. The company, whose investors are wealthy individuals and family offices, also has private-equity and financial and accounting services arms, Farrell said.

Farrell is a longtime real estate investor and developer whose former firm was called Farrell Office Properties. His projects included converting the Garland Building at 111 N. Wabash Ave. to office condominiums. Although that project and similar ones struggled during the recession, Farrell said 97 percent of the Garland space has now been sold, and “our investors did extremely well on the deal.”

BlueRoad’s chairman is Portillo, who will invest in some deals, as he did in the acquisition from Brauvin, Farrell said.

Portillo has been active in real estate investments since selling the Portillo’s Hot Dogs chain to Boston-based Berkshire Partners for nearly $1 billion in 2014.

In late 2014, a Portillo venture paid $74.4 million for 18 Chicago-area buildings leased to his former chain, and also acquired two other Portillo’s buildings in Arizona.

In other real estate investments, Portillo paid more than $24 million last year for an Oswego shopping center and sold a Hinsdale home for more than $3.8 million after he and his daughter-in-law bought it for almost $2 million and rehabbed it.

Tenants in the Chicago-area properties acquired by BlueRoad are Burger King franchises at 2000 W. 47th St. in Chicago and 11740 S. State Route 59 in Plainfield; private elementary and middle school operator Chesterbrook Academy, in buildings at 1571 and 1587 Oswego Road in Naperville; Steak ’n Shake at 2121 Willow Road in Glenview; a Fresenius Medical Care dialysis facility at 2601 S. Harlem Ave. in Berwyn, and National Tire & Battery at 1360 Ring Road in Calumet City.

Other tenants in the more than 1 million-square-foot portfolio include CVS, Advance Auto Parts and Tractor Supply, according to BlueRoad. The buildings are in 18 states.

The average remaining lease term is more than 10 years, Farrell said.

“We have the capital and the flexibility to pursue a range of deals in the office and retail asset classes,” Farrell said. “We will absolutely look at one-off deals. That’s going to be our bread and butter.”

Brauvin, meanwhile, plans to acquire about $200 million in net-leased retail properties for its 17th fund, President James Brault said.