55 W. Monroe Sold to HEARN All News
Posted: August 24, 2011
(Crain's) — A longtime Chicago office investment firm has agreed to buy the Helmut Jahn-designed tower at 55 W. Monroe St. for about $140 million.
Sources say Chicago-based Hearn Co. has the glassy, 40-story tower under contract at a price just higher than $170 per square foot — a healthy figure considering the building is only about 75% leased.
Stephen Hearn, the firm's president and CEO, confirms there's a pending deal but wouldn't comment on pricing.
He says his company, which was founded in 1974 but hasn't owned a downtown building since the late 1980's, began pursuing Chicago deals recently because of the low vacancy for top-tier, so-called Class A office buildings downtown and his sense that no new construction is on the foreseeable horizon.
The direct vacancy rate for Class A buildings in the Central Loop was 10.6% in the second quarter, down slightly from 10.8% a year earlier, according to data from Jones Lang LaSalle Inc. The rate for all of downtown is now 14.1%, up from a year earlier, when it was 13.8%.
“This is good real estate,” Mr. Hearn says of 55 W. Monroe. “I think Chicago has become a tightening market. There will be a continuing need for and demand for quality space in the Central Loop.”
The 807,882-square-foot tower was built in 1980 and last renovated in 2002, just a few years before it suffered a major setback when key tenants Bank One Corp. and law firm Sidley Austin LLP vacated. That pushed the occupancy below 60%.
Mr. Hearn says the building was making progress until the recession hit and prompted many tenants to contract and pull back. Also, a prospective sale of the building in 2008 that never materialized further dampened leasing efforts.
A spokeswoman for the current owner, Jones Lang's investment advisory arm LaSalle Investment Management, declines to comment. Bruce Miller of Jones Lang is representing LaSalle in the sale and also declines to comment.
The building should benefit under new ownership, though as a “second-generation Class A” building the tower competes with offices in both the East and West loops, says Tiffany Winne, a senior managing director with the Chicago office of tenant-rep broker Studley Inc.
“In that class of second-generation Class A buildings, it can be hard to get an identity,” Ms. Winne says.
Mr. Hearn says he's interviewing three brokerage firms to oversee leasing efforts, declining to name them. Jones Lang currently has the assignment.
Mr. Hearn's firm is buying the building in conjunction with a New York-based institutional capital partner that he wouldn't name. He says he began pursuing 55 W. Monroe and a couple other investment prospects here in recent months.
In the '80's, Mr. Hearn's firm bought and rehabbed a handful of vintage office buildings here, including 209 W. Jackson St., 105 W. Madison St. and 67 E. Madison. Hearn sold its last local holding, another Helmut Jahn-designed building at 1007 Church St. in Evanston, in 2006.
The company has focused primarily on Southwest markets such as Phoenix and Southern California in recent years.
“I've been on the sideline in Chicago for quite some time,” he says. “I think the better properties will lease back up.”