CHICAGO—Zurich Alternative Asset Management has just bought a new 345,000 square foot industrial facility at 2501 Galvin Dr. in suburban Elgin, for $29 million, its first real estate investment in the Chicago region. A joint venture partnership between Conor Commercial Real Estate, a member of The McShane Companies, and Globe Corp. developed the property, also known as Northwest Pointe, and recently got it to 100% occupancy. The lucrative conclusion to the project is expected to push even more developers to start building class A facilities in the nation's top markets.
“There is no question that this was a highly sought-after property,” NGKF capital markets executive managing director Kenneth Szady, tells GlobeSt.com. Szady and managing director Krysti Galvin represented all parties, Conor, Globe and Zurich, in the transaction. Essentially, any group with “big buckets of money,” including foreign investors, public REITs and other institutional buyers, was interested in one of the newest industrial buildings in the Chicago region.
In fact, he adds, not only did the property fetch a good price, it sold for a sub 5% yield. “This is probably one of the first sub-5% investments in the industrial sector here.” But as long as leasing activity remains strong enough to fill up the region's many new speculative developments, it probably won't be the last.
“We're seeing an influx of foreign money into the various sectors in Chicago, including office and industrial,” says Szady. Zurich invests in several sectors, but “the connecting thread for them is they only buy best-in-class properties, and only those in the best markets in the country.” He ranks Chicago as the second-best industrial market in the US, eclipsed only by CA, and above other top markets like NJ and TX.
And this deal by Zurich is not just one with local significance. “It will factor into the calculations made by developers at the highest level about putting up new speculative buildings, not just for Elgin, but nationwide,” says Szady. “Many will think, 'wow, somebody built this, got the best tenants, got a long-term investor,” and commanded a premium price.
As reported in GlobeSt.com, Box Partners, LLC recently agreed to lease 205,648 square feet of the building. And this followed the lease signed last year by Illinois Tool Works, one of Chicagoland's largest and most successful corporations, for 136,972 square feet.
GlobeSt.com also reported that ITW had agreed to pay $5.40 per square foot, but Szady does not think the rates were the key factor that caused so many investors like Zurich to take a look. “This is just an outstanding building in an outstanding location.”
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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.
