Suburban Chicago office for sale after landing lease among biggest of pandemic

JV of Kore Investments and BentallGreenOak looking to cash out after signing parent of Illinois’ largest insurer to 133,000 sf lease

BentallGreenOak Sonny Kalsi and Kore's Jack Kim with 3500 Lacey Road (LinkedIn, Kore Investments, LoopNet)
BentallGreenOak's Sonny Kalsi and Kore's Jack Kim with 3500 Lacey Road (LinkedIn, Kore Investments, LoopNet)

With momentum from signing one of the pandemic’s biggest suburban Chicago office leases, the owner of a 13-story Downers Grove building is seeking a buyer.

A joint venture of Denver’s Kore Investments and Toronto’s BentallGreenOak hired the Chicago office of Cushman & Wakefield to sell the 620,000-square-foot building known as Esplanade II at 3500 Lacey Road, Crain’s reported. The listing doesn’t include a price, however, it is expected to fetch between $160 million and $170 million, the outlet reported, citing people familiar with the offering.

Its marketing comes just after the building landed Health Care Service Corp. — the parent of Illinois’ largest insurer Blue Cross Blue Shield — on a 133,000-square-foot lease earlier this year.

While that deal marked a win for Kore and BentallGreenOak, overall it further dampened an already weak suburban office market facing record vacancy, because the insurance company’s parent cut its space by a quarter with the move from its longtime Downers Grove home at 1020 31st Street, where its lease expires at the end of this year.

Kore may try to keep a portion of the building’s revenue stream as BentallGreenOak wants to move on. Kore CEO Jack Kim told Crain’s selling the building outright is “not in our plans” after his company has guided it to comebacks from substantial tenant losses since buying it for $128 million in 2019.

“We’re hoping to continue what we’re doing and we’ll have this asset for a long time, ideally,” he told the outlet.

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With its new anchor tenant, the 30-year-old building is now almost 97 percent leased, Crain’s reported, citing a Cushman flier marketing the building, back to where it was when the Kore venture bought the property.

The building has proven capable of rebounding more than once, most recently with the health insurance parent’s lease after losing McDonald’s vendor Havi Group, which executed an option to exit its 150,000 square feet on Lacey Road to move to about 100,000 square feet at 345 Morgan Street in Chicago’s hot Fulton Market District.

After losing Havi, the property was just 62 percent leased, according to reports on an $86 million commercial mortgage-backed security loan on the property. When Sara Lee relocated one of its units that had occupied 80 percent of the building to the West Loop in 2012, the property bounced back to 86 percent leased within two years, with deals for Havi, investment manager Invesco and sports nutrition company Glanbia Performance Nutrition, Crain’s reported.

Another suburban Chicago property to trade recently in the price range Esplanade II could fetch is the 164-acre Kemper Lakes Business Center, which is also close to fully leased, in the northern suburbs just bought for $190 million by New York’s Northeast Capital, the priciest suburban office sale since 2005.

[Crain’s] — Sam Lounsberry

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