CHICAGO—Real estate investment firm R2 Cos. has just purchased a portfolio of historic properties and several land sites located in neighborhoods adjacent to Chicago's CBD. The company specializes in renovating and recapitalizing properties, both in Chicago and around the Midwest region, and this $86 million acquisition, from Chicago-based Loft Development Corp., is a sign that these already hot submarkets will soon see even more investment.

The properties, located throughout the West Loop, Greektown, River North and Printers Row, include six vintage office buildings and three land sites. KIG principal and managing broker Susan Tjarksen represented the seller in the transaction.

“For a transaction of this scale, it was crucial for KIG to find a buyer that was not only familiar with these neighborhoods, but also had the connections and experience necessary to maximize the value of the underlying real estate through adaptive reuse and multifamily developments,” she says. “R2 was selected because of their successful track record of developing, renovating and repositioning commercial real estate assets, including numerous loft office buildings and land sites, throughout Chicago and the Midwest.”

Built between 1883 and 1904, the properties are collectively 90.8% occupied, with an average of 3.9 years remaining on existing leases. They include:

• Pontiac Building, 542 S. Dearborn St. – Printers Row: This historic 14-story building on the corner of Dearborn and Harrison streets includes 94,738 square feet of retail and office space. Notable tenants include Potbelly Sandwich Works, Chase Bank and Wes Management Services. The building also houses numerous law practices due to its proximity to the Dirksen Federal Building, Kluczynski Federal Building and MCC Chicago. Built in 1891, the Pontiac Building is the oldest surviving work of architecture firm Holabird & Roche in downtown Chicago. It was added to the National Register of Historic Places in 1976.
• 118 S. Clinton St. – West Loop: Located between Monroe and Adams streets, this seven-story, 64,303-square-foot loft office building features a renovated lobby and large, flexible floor plans. Notable tenants include Subway, Dylan's Bar and Grill, Clark Dietz Inc. and Iowa Pacific Holdings LLC. Boasting a Transit Score of 100, the property is steps from Union Station and Ogilvy Transportation Center and within walking distance of several CTA bus and “L” lines.
• 130 S. Jefferson St. – West Loop: This five-story building at the corner of Jefferson and Adams streets includes 76,249 square feet of retail and office space. Tenants include Physicians Immediate Care, Trisect LLC, and Evans, Lowenstein, Shimanovsky & Moscardini Ltd. Offering convenient access to public transportation and nearby expressways, the property includes a billboard that generates additional income.
• 901 W. Jackson Blvd. – West Loop: Located at the corner of Jackson Boulevard and Peoria Street, this five-story, 43,000-square-foot retail and office building features a Terrazzo-floored lobby and private parking lot. Jak's Tap, a tenant for nearly 20 years, occupies 9,222 square feet on the ground level. Other tenants include Endurance Warranty Services LLC and Knell & O'Connor P.C.
• 641 W. Lake St. – Greektown: Featuring exposed brick and timber, this five-story, 108,739-square-foot loft office building at the intersection of Lake and Desplaines streets includes a billboard, private parking and loading dock access, among other amenities. Tenants include the Chicago Literacy Alliance, DuoDesign LLC and Rocketmiles.
• 445 W. Erie St. – River North: This two-story, 52,905-square-foot retail and office building features an atrium lobby and exposed brick and timber. All first and second floor suites have a mezzanine, private bathrooms and mini kitchens. Tenants include Logical Media Group, Olson Communications Inc. and TempoBD.

As part of the acquisition, R2 also acquired the following land sites:

• Randolph/Desplaines – West Loop: Located adjacent to 641 W. Lake St., which was also acquired by R2, this 12,480-square-foot parcel is currently utilized as surface parking lot. It is zoned DX-7, which allows for mixed-use development.
• 708 W. Wayman St. – West Loop: Bordering the Kennedy Expressway, this 53,384-square-foot lot includes parking for 157 vehicles and is partially leased to a parking operator. DX-5 zoning permits mixed-use development.
• Peoria/Green – Greektown: Located between Adams Street and Jackson Boulevard, this 16,709-square-foot lot includes 43 surface parking spaces and is currently used by 901 W. Jackson Blvd. tenants. It is currently zoned DS-3, which allows for warehousing and small business use.

“These properties are located in some of Chicago's hottest neighborhoods for office, retail and residential development, which made them especially attractive from an investment standpoint because we were able to expand our footprint in a single transaction,” says Matt Garrison, managing principal of R2. “With the help of KIG, we were able to see the potential in each asset and value that could be realized through additional investment.”