investment sales and development, this challenging deal required
that three brokerage teams navigate among five different law firms,
two lenders, two borrowers and three different architects.
The transaction broke down into three components: CNA’s lease
at 151 N. Franklin; the firm’s requirement that JBC acquire its existing 1.1-million-sf headquarters at 333 S. Wabash, built for CNA in
1972 and known as “Big Red;” and a 28-month leaseback of 759,000
sf while 151 N. Franklin was being built. Each piece of the deal was
contingent on the success of the others: CNA needed the sale of Big
Red to financially justify its move and manage risk; JBC couldn’t buy
“Big Red” without the short-term recommitment of tenant CNA;
and the new tower needed the
CNA lease in order to secure
Accordingly, three concurrent negotiated documents
were required: the 151 N.
Franklin lease, the 333 S.
Wabash purchase and sale
agreement and the 28-month
leaseback at Big Red. The concept was initiated in March 2015
and closed a year later within a
98-day closing period, once all
contingencies were satisfied.
The execution of this three-pronged deal simultaneously
required strategic and agile
collaboration between the
brokerage team of Bill
Rolander and Jon Cordell of Newmark Grubb Knight Frank;
JLL’s Greg Gerber and Scott Merz; and Eric Feinberg of Savills
Studley. Other professionals involved included CNA’s Tom
Pontarelli, Mark Kruse and Stathy Darcy; John Buck Co.’s Kevin
Hitesand and Richard Lindsay; Kevin Burke, Hinshaw &
Culbertson; J. Kelly Bufton, Seyfarth Shaw LLP; and Eric
Fuglsang, Quarles & Brady.
The team was faced with a number of deadlines, all of which
were financially punitive if not met, including having 151 N.
Franklin 45% pre-leased to obtain construction financing. The
signing of a 101,000-sf lease with law firm Hinshaw & Culbertson
helped JBC achieve 47% pre-lease, which was critical to attracting
lenders to the project and negotiating favorable terms.
NEW LIFE FOR AN OLD POST OFFICE
Vacant for nearly two decades, Chicago’s 2.7-million-sf Old Main
Post Office finally will get a new lease on life now that its days as
a mail-sorting facility are long past. The architecturally distinct
structure looming over the Eisenhower Expressway was vacated
in 1997 for a newer facility, and finally sold for $24 million to
International Property Developers North America. However,
the new ownership’s extensive redevelopment plans failed to
come to fruition.
Uncertainty surrounding the historic space’s future became a
growing source of frustration among Chicago’s residents, business community and public officials, with Mayor Rahm Emanuel
announcing in February of 2016 that the city would take control
of the property through eminent domain. An RFP was issued by
the city in March. However, IPDNA had appointed Savills
Studley in 2014 to sell the property, and shortly after the
Emanuel administration issued its RFP a sale was finalized.
The buyer was New York City-based investment group 601W
Properties, which has strong experience with repositioning trophy
office assets across the US and with which Savills Studley had been
negotiating since the summer of 2015. Contracts were drawn in
March of last year, and the Old Main Post Office sale closed in May
at a net price of $130 million, ahead of a deadline set by the mayor’s office for completing a transaction.
The new owner, which also owns the AON Center and other
properties in Chicago, envisions a $500-million renovation of the
Old Mail Post Office, with plans to transform the nine-story Art
Deco landmark into new office space. The mayor’s office has commented that rehabilitation of the vacant structure is expected to
create roughly 12,000 jobs. The Chicago chapter of NAIOP recognized the deal as the 2016 Broker Transaction of the Year for office
investment. Lisa Davison, Tiffany Winne and Richard Sykes made
up the Savills Studley team behind the deal.
A SUBURBAN TO URBAN MIGRATION
Select Comfort was a suburban tenant since its inception in
Minnesota. The manufacturer and seller of Sleep Number beds
had two leases expiring in suburban Plymouth and wanted to
merge multiple operations into one facility.
Downtown was not a consideration, according to a source, but
Select Comfort operates two suburban locations, and by choosing
a 211,000 sf at Third Ave. South, a five-story, 476,000-sf office building, the company could consolidate the operations. Furthermore,
their new headquarters hosts a data center, and the power it can
provide makes this property “well-suited for a large corporate user.”
Originally constructed as a data center for American Express,
the building was never marketed to traditional office users. The
agent for the property, Transwestern, knew the building would
be a great fit for Select Comfort because it needed to house its
headquarter operation, call center and R&D functions, all under
one roof. The 15-year lease will begin when the company moves
in this October. Transwestern’s Reed Christianson, Erin Wendorf
and Will McDonald represented the building owner, DCI
Technology Holdings, in the lease. CBRE’s Emily Nicoll
represented the tenant.
Steve Cramer, president and CEO of the Minneapolis Downtown
Council and Downtown Improvement District, said at the time that
Select Comfort will be a major addition. “Their presence adds
another internationally known brand name to our Downtown business community,” Cramer said. “We’re excited to have their talented employees join our workforce.”
151 N. Franklin St.
Third Avenue South