Chicago, Illinois – NNN Commercial Real Estate news today is on a major player taking advantage of the current distressed commercial real estate market for office building. Tishman Speyer Properties has agreed to purchase a NNN Commercial Real Estate development, 353 North Clark Street. This NNN Commercial Real Estate site is a new office tower in downtown Chicago.
This NNN Commercial Real Estate development was purchase for less than the entire cost to build the Office Tower. The Commercial Real Estate developer will pay the owner, Mesirow Financial, $380 million for its headquarters at 353 North Clark Street. There were reports that initial price estimates for the 1.2 million square-foot Office Building hovered around $500 million.
This Chicago NNN Commercial Real Estate site offers high quality and craftsmanship which elevates this Office Tower. The Chicago Commercial Property was designed by renowned architect, Dirk Lohan of Lohan Anderson. This architect is the successor firm to Mies van der Rohe’s practice in Chicago. This Chicago Commercial Real Estate development will be assured to take its place among Chicago’s architectural icons. This NNN Commercial Real Estate development was designed for 21st century business, with its 45-story structure. The Chicago Commercial Property was designed with a striking curtain wall of articulated glass and steel and 9-foot, floor-to-ceiling vision glass for the net leased Office space.
The Chicago Net Leased Property purchase is a bright spot for Tishman Speyer. They have spent substantial time over the past two years recapitalizing some Investment Properties acquired at the height of the past booming commercial real estate market. They have also been selling commercial properties from their Investment Property Portfolio and realizing losses on some deals. Since 1978, Tishman Speyer has acquired, built or developed over 325 commercial real estate projects totaling over 116 million square feet. They have acquired a Commercial Property Portfolio in excess of $50.2 billion in total value across the United States, Europe, Latin America and Asia.
This agreement came as an affiliate of Mesirow was running up against a deadline to pay off its construction loans on this Chicago commercial property, according to reports. These recent reports say the price is a little less than the debt on the nearly 1.2 million square-foot Chicago Office tower. This NNN Commercial Real Estate development opened about a year ago with its dramatic, unobstructed views of the city skyline. The significance of this Commercial Property purchase is that this is the first time in more than a decade that a Highrise Office Building of this magnitude, has been sold for below its cost of construction in Chicago.
Tishman Speyer Properties completed the purchase of the new River North skyscraper that was developed by the commercial real estate arm of Mesirow Financial. Tishman Speyer’s acquisition of the building, which was being sold by Mesirow Financial, is the New York-based company’s first Net Leased Investment Property acquisition in the U.S. since the start of the downturn. The Commercial Property sale price is probably the second-largest deal in Chicago this year, following the sale of nearby 300 North LaSalle.
This sale sidesteps a hardcore foreclosure suit that might have been filed by Munich, Germany-based Hypo Real Estate Holding. The German-based Commercial Mortgage Lenders had financed the Chicago commercial real estate project with a construction loan that was coming due very soon. The Hypo loan had an outstanding balance of roughly $330 million and has been extended until Tishman closes on the purchase, sometime before the end of the year.
The project was also financed with a $44-million mezzanine loan from Chicago-based real estate firm Transwestern Investment Company. It is possible that Transwestern might get back as much as 90% of their mezzanine loan funding. We see that particularly in today’s tight senior debt market, mezzanine financing is an increasingly important capital option for growing companies for many reasons.
The sale should clean the slate of tens of millions of dollars in equity invested in the 45-story Office tower. This Chicago Commercial Property was built by a venture which was led by veteran Chicago developer Richard Stein, a Mesirow senior managing director.
As we stated above Chicago’s office market hasn’t seen a new skyscraper sold for less than the construction cost since the collapse of the commercial real estate market in the 1990. When that occurred, the billionaire investor Sam Zell scooped up 161 N. Clark St. and 1 N. Franklin St. at low bargain basement prices.
When the Chicago Commercial Property initially opened, net leasing at 353 N. Clark was going fine. Mesirow and the law firm Jenner & Block had agreed to take more than 60% of the building before construction started back in 2007. Further information was found that the net leasing effort had subsequently stalled, at about 80% occupancy.
The price Tishman Speyer Properties has agreed to pay for the building, about $324 a square foot, stands in sharp contrast to the record-breaking deal in the vicinity of 353 North Clark Street. There was a deal for $503 a foot with a Southern California investment firm acquiring 300 N. LaSalle Street. That 300 N. LaSalle St. Commercial Property was acquired in the summer for that price of $503 per square foot. That LaSalle Street Commercial Property was completed last year and it is approximately 95% net leased already.
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