While closing on the acquisition, GE "simultaneously" sold one of the properties to Keystone, says Greg Bates, managing director of direct investments for GE. Keystone purchased the three building Bannockburn Lakes property at 2201-2333 Waukegan Rd. in Bannockburn. A sales price was not disclosed.
"We see Chicago on an upward trend and we like some of the fundamentals that are happening in the submarkets," Bates says. "We think that EOP had pulled together a portfolio of some of the premier assets in some of the best submarkets." Bates believes the properties "will probably outperform the broader Chicago market over the coming years." The acquisition included a total of 21 buildings in the East-West Corridor submarket of Cook County, in the Central North submarket of Lake County and the O'Hare submarket of Cook County. The properties in the East-West Corridor submarket include the five-building Westbrook Corporate Center at 1 Westbrook Corporate in Westchester; the two-building Oakbrook Terrace at 1 Tower Lane and One Lincoln Centre at 18 W 140 Butterfield Rd. in Oakbrook Terrace; and the three-building Commerce Plaza at 2001 Spring Rd. and the property at 1111 W. 22nd St. in Oak Brook. Besides Bannockburn Lakes, the properties in the Central North submarket include Corporate 500 at 500 Lake Cook Rd. and One Parkway North at One Parkway North, both in Deerfield. Pointe O'Hare at 9550 W. Higgins Rd. in Rosemont is the O'Hare submarket property.
The portfolio is 87% occupied. "Typically, I think the portfolio has about 11% below market rents," Bates says. "And, there is about 50% rollover in the next five years so we think there will be a good opportunity to push rents and improve the tenant experience there." CB Richard Ellis will do the leasing and property management for the portfolio. There will be some "operational and physical improvements to the common areas" but major renovations are not needed for the buildings. "Primarily, it is going to be bringing in new tenants, focusing on leasing and focusing on the existing tenant experience to ensure we have high renewal rates," Bates says.
GE sold the Bannockburn property to Keystone but expects to hold the rest of the portfolio for a period between two to five years. Bates says they believe Chicago's market began a "rebound" in 2006 and they plan to hold the properties through the recovery period. GE sold the Bannockburn property because it "did not match our hold period quite as well and was a better match for Keystone's business model," Bates says. GE prefers assets in the "East-West Corridor and assets that are around the Oak Brook Mall," he says.
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