A five-story office building in Chicago’s River North neighborhood sold for more than triple the price it last traded for eight years ago, underscoring the value of sale-leaseback deals outside the city’s central business district.
A Spanish investor purchased the 41,000 square foot property at 311 West Walton Street for $14.4 million in a deal that closed June 22, according to Miami real estate investment and management firm Azora Exan, which represented the buyer. The deal is a sale-leaseback, meaning the property is sold then immediately leased back to the building’s sole tenant, Chicago marketing firm AgencyEA.
The property last sold for $4.6 million in 2014, Cook County public records show. The buyer is “a private ultra-high net worth investor from Spain,” said Azora Exan’s Thania Potosome, declining to provide the buyer’s name.
At its sale price, just under the $15 million asking price, it offers the new owner a 6.2 percent cap rate, a measure of rental income after expenses divided by a property’s purchase price, said James Mead of SVN’s Chicago office, who represented the seller, SALF 920 LLC. The seller put less than $5 million into the property since buying it eight years ago, adding features such as a rooftop deck.
“Despite all the negative publicity Chicago is getting, there is still appetite from foreign investors for these types of deals,” Mead said.
The sale demonstrates the value of Class B buildings off the beaten path — the building is outside Chicago’s main business district, the Loop — especially when leased to a single tenant. The sale-leaseback setup is a factor in adding value to such properties, Mead said.
“A lot of buildings in that market are multi-tenant and it’s not as attractive to some investors,” Mead said.
Demand for sale-leasebacks has strengthened during the pandemic because they allow owners to free up cash, although they were trending upward before 2020.
Earlier this month, CME sold a 300,000-square-foot building at 333 South LaSalle Street for $39.5 million in a sale-leaseback transaction with electric utility ComEd.
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