CHICAGO—The goal of South Street Capital, a Chicago based, private equity real estate investment firm, has been to acquire under-performing assets and turn them into stabilized, cash-flowing properties. And the company has now sold off about 80% of its office portfolio, including most recently, for about $7.15 million, a loft office building located in the West Loop neighborhood of Chicago.
The three-story, 30,000 square foot loft office building located at 1130 W. Monroe St. was originally acquired in 2013. According to Cook County records, South Street had paid $3.8 million for the property. Following the acquisition, the firm improved the building with new common areas and mechanical systems.
Marc Muinzer, South Street Capital's founder, tells GlobeSt.com that the company is still planning to acquire properties in Chicago, but headwinds in its office market, including the big boost in supply on the way, helped lead to the decision to also redeploy sales proceeds to other cities in the Midwest, Southwest and on the West Coast, including Austin, Indianapolis, and Los Angeles.
Its latest West Loop transaction "was part of a successful culmination of a multi-year process," he adds. "Earlier in the current economic cycle we felt that the loft office market in Chicago was on the upswing and made a strategic decision to acquire numerous office assets. Our market judgment proved correct and significant value was created across our portfolio. While the new owner might enjoy additional success with 1130 W. Monroe Street, we are pleased to exit this investment with a meaningful gain."
South Street Capital has now sold over 700,000 square feet of loft office buildings. That includes the 2015 sale of 1165 N. Clark, located in Chicago's Gold Coast neighborhood, for $22.75 million to AIMS Real Estate, an affiliate of New York-based Goldman Sachs
"Following the disposition of a significant number of our office holdings located in Chicago, South Street Capital plans to patiently redeploy the sale proceeds back into real estate assets throughout the Midwest and West Coast," Muinzer says. "In our view, increased tenant shadow space coupled with a surge in supply from new construction and proposed loft office conversions will present headwinds for the Chicago office market. In addition, if the current macro-economic volatility persists and a meaningful stabilization does not materialize, the effects of these headwinds may be exacerbated. As these scenarios unfold, we remain ready to quickly execute on new acquisition opportunities as they may arise."
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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.
