One sale is 55 E. Jackson, a 440,000-sf building currently owned by CNA Financial Corp., an insurer that has recently reduced its staff. The property consists of a north tower and a south tower; CNA will sell the nearly empty north tower to Chicago-based Marc Realty for a reported $19 million, or about $43 per sf.
A much larger sale involves the new Quaker Oats building, 555 W. Monroe, a West Loop property owned by the Fifield Cos. and CB Richard Ellis Investors Strategic Partners, neither of whom could be contacted for this story. The price for this 420,000-sf property was reportedly $99 million, or $235 per sf; the buyer, Prudential Financial.
"Real estate is a very attractive investment overall, because of low interest rates, and because it's hard to find a better return these days," said Deborah Riley, managing director of the central region of GE Real Estate (the new name for GE Capital Real Estate), commenting on the macroeconomic reasons that big investors are looking hard at big real estate. "So we're seeing an increase in acquisitions. Moreover, buyers and sellers are now coming closer on sale prices."
Though both of the aforementioned properties will, if the deals go through, be bought by domestic business entities, a wave of German money is bidding on Chicago properties, helping to drive up prices. Why German money? One reason is that the euro, which as recently as early 2002 was languishing against the dollar, has shown unexpected strength lately, meaning that it's a good time for euro-denominated investors to buy dollar-priced assets. Also, recent tax law changes in the Federal Republic encourage overseas investment by German companies. Why Chicago? Because it's perceived as a more stable market than either coast, those familiar with the investment climate say.
Late in the summer, the Davis Cos. sold 181 W. Madison for $248 million to Atlanta-based TMW Real Estate Group, which was making its first acquisition here on behalf of a German closed-end public fund. It may not be the company's last, according to a broker involved in the deal. Also, German investors are in the process of buying 55 E. Monroe and One North Wacker, the latter of which is one of Downtown's newest and technically sophisticated buildings.
"There's no question that German institutional investors are very active in this market," Riley tells GlobeSt.com. "They've been reallocating their capital into real estate. Of course, they aren't the only ones interested in this market, but they are adding to the competitiveness of the market. There are a lot of bids now for every strong property."
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