Rubenstein Partners teams with GlenStar to buy suburban office complex

The $121M deal for Continental Towers buys out Walton Street Capital's stake
By John O’Brien | August 20, 2018 02:00PM

GlenStar Managing Principal & Managing Broker Rand A. Diamond and Rubenstein Partners Founder David Rubenstein

UPDATE, Aug. 22, 2:20 p.m.: Rubenstein Partners bought a stake in the Continental Towers office complex in Rolling Meadows, in a deal worth $121.5 million.

In 2013, GlenStar Properties bought the development at 1701 Golf Road with Chicago-based Walton Street Capital. Coming off the recession, the duo paid $58.5 million, which was considered a deep discount.

The GlenStar/Walton Street venture picked up the 911,000-square-foot, three-building complex after previous owner Prime Realty Group defaulted on a $115 million loan from CWCapital, according to Crain’s.

Philadelphia-based Rubenstein is now buying out Walton Street’s stake, landing an $84.5 million loan from Column Financial to pay for it. GlenStar remains a partner.

Since acquiring the property, GlenStar of Chicago spent $30 million upgrading the complex, including building a 734-stall parking garage. Occupancy has since jumped from 55 percent to 90 percent. The new ownership group plans to spend $20 million more on additional renovations, according to a press release announcing the deal. The work will include an overhaul of the complex’s two-acre plaza deck, lobbies, cafe and amenities, the new owners said.

The change in ownership for the complex comes as its largest tenant, heavy equipment maker Komatsu, announced it plans to vacate its 105,000-square-foot space in 2020.

The suburban office market had an “unexpectedly strong” second quarter, according to a report from commercial brokerage MB Real Estate, with vacancy rates dropping slightly to 20 percent.

The healthiest suburban submarket was O’Hare, according to the report. Its vacancy rate was 14 percent, the lowest in at least 15 years. That put it in line with Downtown’s vacancy rate.

O’Hare saw the priciest suburban office building sale of the six recorded in the second quarter, when Angelo Gordon & Co. bought the Presidents Plaza complex for $147 million. Blackstone, meanwhile, is looking to sell the O’Hare International Center for $75 million.

Though GlenStar is developing a 150,000-square-foot office building for Central States Pension fund in the O’Hare submarket, its plans for a large apartment complex not far from the airport are in limbo: The Chicago City Council shelved apartment plans amid opposition from the local alderman, prompting GlenStar to file suit.

This article has been updated to include loan information.