Suburban Chicago office complex sells to New York firm in priciest deal this year

Northeast Capital Group spends big even in high-vacancy market

Apollo's Marc Rowan and Kemper Lakes Business Center (Apollo Global Management, Kemper Lakes Business Center)
Apollo's Marc Rowan and Kemper Lakes Business Center (Apollo Global Management, Kemper Lakes Business Center)

A giant corporate complex in Chicago’s northern suburbs changed hands for $190 million, the priciest sale in the suburbs since well before the pandemic, suggesting demand is rising for an office market suffering from high vacancies.

Northeast Capital Group, based in Spring Valley, New York, bought the Kemper Lake Business Center in suburban Lake County. It’s bordered by one of Illinois’ top golf courses, the Kemper Lakes Golf Club, which hosted the Women’s PGA Championship in 2018 and the PGA Championship in 1989.

The nearly 1.1 million-square-foot, four-building property was listed for $185 million in October. Apollo Global Management, which bought the property for $127 million in 2014, was the seller.

Northeast declined to comment. Apollo didn’t return a request for comment.

The building was 94 percent leased as of October to tenants including office products manufacturer ACCO Brands Corporation. Its second-largest tenant, Dovenmuehle Mortgage, which rented more than 18 percent of the offices, renewed a lease for another 10 years during the pandemic, with a lease expiration date of May 2031, according to a 2020 Morningstar report on a commercial mortgage-backed security loan on the property. The recent deal was financed with a new $90 million loan from Bethpage Federal Credit Union, brokered by Meridian Capital Group.

Meanwhile, suburban office vacancies as a whole are weighing on the market. Vacancy has set a new record high in each of the past five quarters, hitting 27.1 percent last quarter, JLL found, though the market’s retreat has started to slow. The northwest and north suburban submarkets, which include Lake Zurich, have been hit the hardest, with the northwest area at 35 percent vacant.

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Northeast’s purchase illustrates current office demand is increasingly focused on high-quality properties along easy-to-access highways that have been recently renovated or newly built. Brokers said much of the suburban office market’s vacancy rate has been driven upward by properties that aren’t as easy to get to and lack modern amenities.

When Apollo bought Kemper Lakes, the property had just undergone extensive renovations.

Northeast Capital joins New York-based Opal Holdings with among the biggest bets on suburban Chicago’s office market rebounding. Opal spent $660 million on a trio of buildings that included the Leo Burnett building in downtown Chicago and two suburban properties, and then last month took an undisclosed percent interest in the $73.3 million purchase of a Naperville office building with partner Katherine Caragena, a New York-based investor, to raise its bet.

Opal’s nearly $180 million acquisition of the Corporate 500 complex in Deerfield — which is home to Caterpillar’s headquarters — was the priciest suburban office sale in at least five years, until Northeast’s Kemper Lakes purchase, according to Collier’s.

The Kemper Lakes sale could be outdone if the All-State campus sale closes this year for $232 million to a developer that plans to turn it into warehouses. That deal, though, is contingent upon getting approval from local governments to redevelop the property into a large warehousing complex, and the two suburbs nearby the property are battling over the rights to annex it.

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