Hearn Poised for Big Gain in $241 Million Loop Office Sale All News
Posted: September 3, 2014
The Chicago-based office investor agreed to sell the Helmut Jahn-designed tower at 55 W. Monroe St. for about $300 per square foot, or $241 million, to John Hancock Real Estate, according to people familiar with the deal.
That's 77 percent more than the $136 million Hearn and its partner, New York-based Mount Kellett Capital Management L.P., paid for the 803,046-square-foot tower in December 2011, when it was about 32 percent empty and Chicago office values were much lower. The building is now about 6 percent vacant.
The Hearn venture also spent money on new amenities, created and furnished “spec suites” and offered generous rent concessions to quickly fill the glassy tower at Monroe and Dearborn streets. But in doing so, Hearn was able to cash in on the value of those leases when it came time to sell less than three years later.
'MADE THEIR MONEY ON THE BUY'
“They had the vision to buy it right, which gave them the capability to give more concessions and still get a strong return on the sale of the building,” said tenant broker Steve Schneider, a DTZ executive vice president who represented technology company Channel IQ and public relations firm Walker Sands Communications in seven-year leases in the tower for about 31,000 square feet combined. “They made their money on the buy.”
No downtown landlord was as competitive as the Hearn venture on leases of less than 10 years, Mr. Schneider said. Upgrades such as a new fitness center and a bike room also made the building, formerly known as the Xerox Center, more competitive than it had been in past years, he said.
“Hearn and (leasing broker J.F. McKinney & Associates Ltd.) worked well together to meet the needs of those companies, and they did a fantastic job of selling the building,” he said. “They added a lot of amenities and did a lot of turnkey deals without requiring a 10-year lease term. That was a big sell for the clients I put in there.”
Most of the new leases were for less than a full floor. In Hearn's largest lease in the tower, Lombard-based marketing firm the Marketing Store Worldwide LLC agreed to move into 31,348 square feet there in 2012.
Stephen Hearn, president and CEO of Hearn, declined to comment, as did a spokeswoman for Toronto-based insurer Manulife Financial Corp., John Hancock's parent company. The broker on the transaction, Bruce Miller of Chicago-based Jones Lang LaSalle Inc., did not return calls.
STRONGEST SALES YEAR SINCE CRASH
The high price for 55 W. Monroe continues the strongest year of downtown office sales since the crash in 2008, highlighted by a Chicago-record $850 million sale of the River North tower at 300 N. LaSalle St. to California-based Irvine Co.
John Hancock Real Estate is familiar with the downtown Chicago office market. It bought the 41-story Crain Communications Building at 150 N. Michigan Ave. for $102 million in 2012 and last year paid $214.5 million for the 40-story tower at 200 S. Wacker Drive that had been owned by a venture led by Chicago billionaire Sam Zell.
Hearn last week completed its $375 million acquisition of the 57-story Three First National Plaza office tower at 70 W. Madison St., a block north of 55 W. Monroe. Last year it paid $140 million for the office and parking portions of the 100-story John Hancock Center on North Michigan Avenue.
By Ryan Ori