CHICAGO—Although there has been a lot of chatter about how CBDs are the hot markets for investors, Rand Diamond, a principal at GlenStar Properties LLC, which just purchased Continental Towers, a 910,796-square-foot office complex in suburban Rolling Meadows, tells GlobeSt.com that “I think there are opportunities anywhere. It's not about being in any particular submarket; it's about the particular opportunity.”
And Diamond says Continental Towers, currently about 40% vacant, remains a great opportunity for investors. “It's been a successful property for most of its life,” but then hit an unusual run of bad luck. “This last cycle in 2007 and 2008 when the world blew apart, a lot of its largest tenants were mortgage companies, and that started a downward spiral.”
When the rising vacancy rate caused the owner to default on its loan in 2010, Diamond adds, the loan servicer took over “with very little capital to do anything.” The property naturally deteriorated and could not attract new tenants to replace the busted mortgage companies. “It now needs new life breathed into it.”
How much that will cost remains undecided. “We're still developing our capital plan, but I think it will be $7 million and $10 million,” Diamond says. The firm will begin by refurbishing the driveways and entranceways, parking lot and landscaping. Signage, restrooms, tenant corridors and lobbies will also get a fix-up.
“This has been our strategy for ten years,” he adds. Chicago-based GlenStar was founded in 2003 and specializes in value-added properties. And Walton Street Capital LLC, GlenStar's partner on the Continental deal, “has repositioned many assets all over the country.” In 2006, for example, GlenStar bought the 821,000-square-foot Presidents Plaza at 8600-8700 W. Bryn Mawr Ave. for $129 million and invested about $10 million in upgrades. Last August, GlobeSt.com reported that GlenStar had signed leases for about 272,000-square-feet of space in the previous year, boosting the occupancy rate to 80%. Diamond says that rate has now hit about 84%.
“The broker community in the northwest suburbs knows the [Continental] property very well,” and Diamond expects “we're going to get market-level rents.” And even though “we can do less expensive deals in there,” since Continental only cost them about $59 million, “we're not just going to give it away.”
The partners' also have approval to build an additional 1-million-square-feet of office space on the 34-acre campus and have begun looking for build-to-suit opportunities. “We're hopeful that some will come along.” Meanwhile, the push to refill the existing towers goes forward. “We're getting close on a few deals.”
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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.
