Both buildings are in the Illinois Center office complex, developed in the early 1970s. The 32-story, 1-million-sf One Illinois Center building at the corner of Michigan Avenue and Wacker Drive is being sold by Lincoln Property Co. and Carlyle Group 86% leased, with Health Care Services Corp. being the anchor tenant with 202,000 sf leased through March 2017.
Just as it has done already with 233 N. Michigan Ave., Parkway Properties, Inc. expects to sell off a 75% stake in 111 E. Wacker Dr. later this year. Even though the building has undergone $18 million in renovations in recent years, Parkway Properties plans to spend another $3.7 million on improvements. Leasing vacant space is expected to cost another $12 million, according to the company, which will use third-party agents for both the office and retail space.
Although the purchase price represents a 6.3% capitalization rate, Parkway Properties, Inc. says it is buying One Illinois Center 23% below replacement cost. The REIT will use a $148.5-million mortgage at 6.27% to buy the building, which is considered a twin to Parkway's Two Illinois Center.
The sale means a move for Jay Buckley, vice president and asset manager for Tennessee. He will move to Chicago to oversee the 2 million sf local portfolio as senior vice president and asset manager.Parkway Properties, Inc. will have 16% of its portfolio in Chicago based on square footage, second only to Houston. However, revenue from the two Illinois Center buildings will be 24% of the REIT's rental income, with 17% coming from Houston.
The current owners paid $113.5 million for One Illinois Center in 1999. The building was most recently refinanced for $100 million by Citigroup Global Markets in 2004, according to documents filed with the Cook County Recorder of Deeds office. Parkway Properties, Inc. acquired Two Illinois Center in 2001 for $172.3 million. Most recently, Parkway Properties struck its second joint venture deal involving 233 N. Michigan Ave., but Orlando-based Estein & Associates backed away.
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