CHICAGO—R2 Cos., a Chicago based real estate investment firm, and AIMS Real Estate, a business unit of Goldman Sachs Asset Management, have formed a strategic partnership to recapitalize R2's office property at 1165 N. Clark St. in the Gold Coast. R2 officials say the area can compete with office submarkets like River North since it has similar amenities and even better transportation options.
R2, formerly known as South Street Capital, acquired the 100,000 square-foot building in July 2013 for about $11.3 million, according to Cook County property records. It has already completed significant renovations to the building and signed ten new leases including ones for Gold Coast Bank and Assemble™, a Chicago-based shared office operator. A CVS Health occupies the property's retail portion at the corner of Clark St. and Division St.
“I don't think of this as a discount location,” Max Meyers, chief investment officer at R2, tells GlobeSt.com, although it does have better pricing than River North. “We think it has long-term value because people love officing up here. From a transportation standpoint, it's arguable stronger than River North.”
In June 2014, for example, the CTA unveiled a new mezzanine entrance to the Clark/Division Red-line station adjacent to the building and will soon complete other renovations. And Fifield Cos. will soon break ground on a 35-story apartment tower above a brand new 56,000 square-foot Jewel-Osco. Furthermore, Fred Latsko's Structure Management Midwest LLC has announced plans for a retail and apartment re-development at 1201 N. Clark St.
This is the fifth joint venture project for R2 and AIMS. In Chicago, the partners recapitalized two loft office buildings, 900 N. Franklin and 224 N. Desplaines, located in the River North and West Loop neighborhoods, respectively. R2 acquired 900 N. Franklin in 2012 and 224 N. Desplaines in 2013. It brought both distressed properties to approximately 100% occupancy. R2 and AIMS have also partnered on several projects in Minneapolis.
Meyers would not say how much money AIMS would bring to 1165 N. Clark St., but did say R2 plans to continue its modernization effort and reposition the property into a core asset. Regarding its unimproved parking lot, “all options are on the table.” Bringing Assemble to the building was important to the effort since it “brings in more progressive tenants. And some of these tenants may outgrow their shared office spaces and look for their own space in the building. We're now on the radar of creative office users and start-ups.”
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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.
