CHICAGO—137 S. State St. is not an imposing structure, but it provides critical services to building owners throughout the Loop, and Newmark Grubb Knight Frank just completed the sale of a triple net ground lease located there for $7,100,000 on behalf of the seller, a local family trust. A CA-based private investor bought the property at a record low cap rate of 3.1%, an all-time low for comparable ground lease sales, according to NGKF officials.

Investors are always on the lookout for mission-critical facilities, but 137 S. State presented a rare opportunity. The four-story structure was constructed in 1993 by Exelon Corp. and includes a 50,530 square-foot cooling plant operated by building owner Enwave Energy Corp., a division of Brookfield Infrastructure Partners, LP. The plant provides chilled-water cooling services to more than 100 commercial buildings throughout the Loop via an underground network of pipes. The ground lease does not expire until December 2043 and the tenant has a one-time, forty-nine year lease option. A CVS Pharmacy occupies the ground floor.

“The long-term nature of the existing ground lease, coupled with the tenant's infrastructure investment in the property, made this investment opportunity one of the more secure cash-flowing opportunities available in the market,” says Andy Gallas, a senior managing director with NGKF. “The seller benefited from a marketplace hungry for core investments, which contributed to the record-low sales cap rate. The buyer will benefit from secure cash flow over the remainder of the lease term, along with the residual value of one of the better located parcels in the city of Chicago.”