CHICAGO—Back in April 2012, when GlenStar Properties, LLC and the USAA Real Estate Co. purchased the Chicago Board of Trade building for $151 million, the new owners set a goal of transforming the 84-year-old landmark into a true player in the downtown office market. At the time, the 1.3-million-square-foot building at 141 W. Jackson was only 61% occupied, with most of the space occupied by trading firms, many of which had been there for decades.
The partners' first step was to preserve this existing tenant base, and they successfully renewed 123 leases, which accounted for a total of about 250,000-square-feet. But in the last six months, they also finished $25 million in capital improvements and brought in a host of new tenants that include software, engineering, public relations, investment and data center firms.
“To be successful, you need to be as attractive to as many people as possible,” Christian Domin, GlenStar's managing director, tells GlobeSt.com. The occupancy rate has hit about 70%, and within a little more than a year, the partners expect to have a stable property that will attract interest from the deep-pocketed investors currently hunting for acquisitions in the CBD's vibrant office market. “You just can't do that with one industry.”
However, the 123 tenants that recently renewed were just the first wave of lease expirations, and Domin says they remain committed to preserving the CBOT building's reputation as a home for trading firms. “It's a phenomenal tenant base and we don't want anyone going anywhere. Those renewals proved to us that our plans are working, and within the next 18 months we will have been through everyone of significant size.”
Still, he adds, “we have to be as competitive as anyone to retain the trading entities we have,” mainly because the exchanges moved to electronic trading in the 1990s, making the firms far more mobile and less dependent on location. Although some trading firms will always want an office near the trading floor “the vast majority don't need to be there.”
To ensure that both trading and non-trading firms will consider occupying space in the CBOT building, the owners have installed up-to-date fiber optic technology, including a new “meet-me-room” and a fiber backbone riser system. Tenants who take advantage of this convenience can now connect directly with more than a dozen telecom providers.
Other improvements include a new 10,000-square-foot, 24/7 fitness center, a 24/7 video conference center, and a refurbished lobby. New restaurants and shops, including Mezza Grill and TR Napa Valley, a wine shop and tasting room, will also soon open.
In addition, GlenStar signed a long-term lease extension with Ceres Café, the building's ground-floor restaurant, which included an agreement to invest significant capital in the space. “It's an institution both in the building and in the Loop,” Domin says, and this move illustrates the owners' commitment to updating the building while preserving its historic character.
The new tenants not involved in trading occupy about 60,000-square-feet. Data Stream LLC, for example, a technology services company, recently agreed to occupy 11,106-square-feet. Regus, a provider of shared offices and co-working spaces, took 17,729-square-feet, and Threshold Acoustics, an engineering firm, signed a lease for 6,596-square-feet. Others include: Startham Partners, an executive coaching company; energy firm Noble Americas and Steidlmayer Software.
“By the end of 2015, I'd be surprised if we didn't have an occupancy rate of 85%,” Domin adds, with non-trading firms taking up most of the newly-occupied space. “People pay more for properties that are well-leased, and if you can hit 85% you're in a real good spot.” Therefore, for GlenStar and USAA “there will be an exit at some point.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
