This Week's Chicago Deal Sheet

Cap rates in the single-tenant net lease retail, office and industrial sectors reached a new all-time low in Q3, according to The Boulder Group’s new Q3 Net Lease Research Report. When compared to Q2, cap rates compressed by 19, 10 and 11 basis points, respectively, for retail, office and industrial.

"Cap rate compression in the third quarter of 2020 can be primarily attributed to the recent announcement by the Federal Reserve which suggested interest rates will remain near zero at least through 2023," The Boulder Group President Randy Blankstein said. "Combining this with a recent 'flight to quality,' there has been significant cap rate compression for strong credit and essential net-leased assets."

Boulder officials said they expect net lease transaction volume for 2020 will be significantly lower than 2019. Some of the decline can be attributed to the impact of the pandemic on vulnerable retail assets such as movie theaters, gyms and second-tier casual dining.

"Owners of less desired net lease assets are holding back from the market as they are uninterested in selling at unfavorable pricing," Boulder partner Jimmy Goodman added. "Accordingly, the supply of net lease properties experienced a sharp decline of approximately 9% in Q3.”

As supply decreased, investors moved toward assets with high-quality tenants and long-term leases.

"The retail sector experienced its largest cap rate move since 2014 as private and 1031 exchange investors aggressively sought the lower priced assets this sector provided," Boulder Senior Vice President John Feeney said. "With unprecedented cap rates across all three net lease sectors, sellers are aggressively pricing high-quality net lease properties to take advantage of the private capital chasing this product type."

EXECS

MBRE’s healthcare team separated from MB Real Estate Services and launched Remedy Medical Properties, a Chicago-based independent company. The firm will exclusively focus on healthcare real estate. Through a long-standing partnership with Kayne Anderson Real Estate, Remedy expanded its national reach, now owning and managing 20.5M SF of healthcare facilities and operating 22 offices across 40 states.

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Bridge Development Partners named Nick Siegel the partner for its Chicago region. Siegel, who formerly served as senior vice president at Bridge, will oversee the company’s industrial market acquisition, leasing, development and construction for its Chicagoland portfolio. He joined the firm in 2015 as an analyst. Before that, Siegel was a financial analyst with CBRE.

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Stream Realty Partners expanded its Chicago team by hiring Brian Duffy as senior vice president of tenant representation. Most recently, Duffy served as director of tenant representation transaction advisory at Cushman & Wakefield and participated in more than 125 transactions valued close to $600M.

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Chicago-based @properties launched a national franchise brand so broker-owners and agents can access its technology, marketing, training and business development systems. To help lead this rollout, @properties has hired Chris Lim as president, head of brand growth. Lim, an 18-year industry veteran, founded Climb Real Estate in San Francisco in 2010 and sold the brokerage firm in 2018 to Realogy Holdings.

SALES

GW Property Group sold for $5.9M a new 3K SF, single-tenant retail building triple net leased to 7-Eleven at 3159 North Clybourn Ave. at the five-way intersection of Clybourn, Western and Belmont avenues on Chicago’s North Side. A team led by JLL Capital Markets’ Alex Sharrin, Alex Geanakos and Truman Tiernan marketed the property on behalf of the seller. The property opened in July.

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A local real estate operator bought 3124-28 North Kimball Ave., a 16-unit building in Chicago’s Avondale neighborhood, for $2.9M. Interra Realty’s Brad Feldman represented the undisclosed seller. Interra’s Joe Smazal represented the confidential buyer. Built in 1931 and last renovated in 2012, 3124-28 North Kimball Ave. was 81% occupied at the time of sale.

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Fairchild Acquisitions, a local real estate development and management company, bought for $5.3M a 42-unit corridor-style apartment building at 5710 North Winthrop Ave. in Chicago’s Edgewater neighborhood. The seller was a private local investor. Apartment Investment Advisers brokered the sale, one of several apartment building purchases it brokered for Fairchild in the neighborhood, including a 28-unit building at 6211 North Kenmore Ave., a 39-unit building at 6000 North Winthrop Ave. and a 41-unit building at 6565 North Lakewood Ave.

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Deibel Laboratories purchased a 17K SF office/warehouse facility at 6150 Mulford St. in northwest suburban Niles. The company, which has 11 laboratories across North America, has relocated to this facility from its previous location in nearby Lincolnwood. Entre Commercial Realty’s Nick Walby represented Deibel, and Colliers International’s Brendan Green and Chris Volkert represented the seller. Deibel paid $1.2M, according to Cook County property records.

LEASES

Leasing has begun at Westerly, Chicago-based developer Fifield Cos.’ 188-unit mixed-use apartment development at 740 North Aberdeen St. in Chicago’s River West neighborhood. Fifield expects first move-ins in October. Designed by FitzGerald Associates Architects and built by James McHugh Construction Co., the building includes a mix of studio, one-, two- and three-bedroom apartments, with interiors by Morgante Wilson Architects and more than 2K SF of ground-floor commercial space.

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King Solutions signed a 138K SF warehouse lease at 200 South Pinnacle Drive in southwest suburban Romeoville. The logistics firm will make the move from 500 Regency Drive in Glendale Heights when this new lease starts in November. Colliers International | Chicago’s Mike Morgan, Brian Netsky and Jim Herbst represented King Solutions.

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Urban Innovations signed four new leases with tenants at its properties in Chicago’s River North neighborhood:

• C|Change Communications Inc. will move from Fulton Market and occupy 7K SF at 372 West Ontario St. SVN Commercial Chicago’s Deena Zimmerman and Christian Peppler represented the tenant.
• DoorDash Inc. more than tripled its office space at 314 West Superior St. to 13K SF. Cushman & Wakefield’s Jeff Skender, Ari Klein, Scott Shelbourne and Greg Pickett represented DoorDash.
• Field Trip Ventures USA Inc. signed a lease for 4K SF at 325 West Huron St. It was represented by Colliers International’s Tony Karmin and Joe Stevens.
• Windsor Advantage, a banking and financial services firm, expanded its office space to 4K SF at 444 North Wells St. Avison Young’s Chris O’Leary represented Windsor Advantage.

Candice Murphy and Aaron Zaretsky of Urban Innovations represented ownership on all four transactions.

FINANCING

Inland Bank and Trust closed a $5.2M acquisition term loan for a 92K SF industrial building in southwest suburban Bedford Park. A national distribution operator occupies the entire property. Inland Bank’s Gia Tomaszewski originated the loan. The transaction was a sale-leaseback in which the tenant will lease back and continue to operate the warehouse property.

CONSTRUCTION AND DEVELOPMENT 

Kinzie Builders topped off 10 North Main, a $20M luxury rental community in northwest suburban Mount Prospect. The five-story building will bring 97 residences to downtown Mount Prospect when it opens in January. Kinzie Builders’ construction of Avere on Duane, a $15M, four-story, 48-unit luxury rental development in west suburban Glen Ellyn, also is on track for a January opening, company officials said.

Kinzie Builders is developing 10 North Main for owner First Equity Group and developer Harlem Irving Cos. The architect is OKW Architects. Other partners include ECL Engineer Consultants, Pierce Engineering, LETech Inc., V3 Cos. and Kathryn Talty Landscape Architecture.

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Principle Construction Corp. completed a speculative warehouse construction project with 30-foot clear height ceilings for Midwest Industrial Funds at 1100 North Raddant Road in west suburban Batavia. The 102K SF property includes 97K SF of warehouse space and 5K SF of office, which can be divided among two tenants. Principle’s Mark Augustyn was the principal on the project. Principle’s Jon Anderson acted as the project manager. Principle’s Dennis Crawford served as superintendent. Harris Architects provided design services.

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General contractor Summit Design + Build completed construction at The Clark, located at 1201 North Clark St. in Chicago’s Gold Coast neighborhood. The former four-story office and retail building was converted into luxury apartments. Summit also added five more stories of luxury apartments, including a ninth-floor penthouse and community deck. The 90K SF now features 98 apartments as well as 10K SF of first-floor retail space. Hartshorne Plunkard Architects served as the project architect.

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Venture One Real Estate broke ground on Route 60 Logistics Center, an infill facility at 1300 Allanson Road in the Lake County suburb of Mundelein. The firm plans to deliver the 195K SF building in Q2 2021. Chris Volkert, Ned Frank and Pat Hake of Colliers International will market the facility on behalf of Venture One. Meridian Design Build is the general contractor. 

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The Opus Group started construction on an industrial build-to-suit in northwest suburban West Dundee’s Oakview Corporate Park. WEN Power Tools will relocate its headquarters to the 180K SF building, which will have 32-foot clear heights and will be more than three times larger than its current space. Opus is providing development services and is the design-builder, interior designer, architect and structural engineer of record. Eric Chang from U.S. Asia Investment Group represented WEN Power Tools, and Darwin Realty’s Noel Liston represented Opus. The project is slated for completion in March.

THIS AND THAT

Sterling Bay and Harrison Street announced a joint venture partnership at 2430 North Halsted St., a 125K SF medical research facility redeveloped and brought to market by Sterling Bay in 2019. The five-story property is over 50% leased to Exicure, Evozyne and Vanqua Bio, three biotech companies. Harrison Street has already invested more than $8B within the life sciences and medical office space across 20M SF in North America and the UK, Harrison officials say.

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The Habitat Co. was awarded property management of Eliot House, a 324-unit high-rise condominium building at 1255 North Sandburg Terrace. It is the third significant Chicago condominium management contract awarded to Habitat in 2020; the firm announced its management of the 724-unit Park Tower in January, followed by the 234-unit Metropolitan Tower in July. Designed by Chicago architectural firm Solomon, Cordwell & Buentz and constructed in 1963 as apartments, the 28-story Eliot House anchors Carl Sandburg Village, a residential community that includes nine high- and mid-rise condominium buildings.

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Although its deal activity was less than 1M SF, the downtown office market saw a 3.2% increase in leasing over last quarter, according to a Q3 2020 market report by Savills Chicago. In addition, overall availability surged 200 basis points to 18.6%, the highest rate since the late 2000s, and the supply of available sublease space increased by more than 25% from Q2.