Bridge braces for loss as tenants flee suburban Chicago office

Jonathan Slager’s Bridge Investment Group isn’t up for steering a suburban Chicago office turnaround.

Rather than try to refill the 490,000-square-foot Windy Point office campus in Schaumburg in the face of its biggest tenants making cuts to their leases, the publicly traded REIT is moving on from the property at a loss from what the firm paid for it in 2018, according to public records and people familiar with the property.

The two-building campus, featuring structures of 11 and seven stories, was marketed for sale by Newmark and put under contract through an auction last month. While a deal has not yet closed, the sale is on track to be finalized near the end of year. The buyer is said to be an investor making an initial entry into the Chicago-area office scene, according to a person familiar with the offering.

The buyer is paying far less than the $74 million value attached to the property when Bridge bought it in 2018 as part of a 13-building trade of properties across the nation in a deal with Piedmont Office Realty Trust.

Values have slid in the suburbs against a backdrop of near record-high vacancies in the office market. Tenants shed 70,000 square feet more than they absorbed in the Chicago suburbs in the third quarter, the least of any quarter so far this year, according to CBRE. While the overall vacancy rate in the suburbs is 24 percent, and a record high of 25 percent for Class A office buildings such as Windy Point, it’s even worse in the northwest suburbs — which includes Schaumburg — at 30 percent vacant.

Bridge’s loss stems from the departures of tenants — and the rental revenues they provided — from the building. Downsizing is underway for both OptumRx, which had leased the entire 11-story building and is now going to just one floor, as well as Comcast, which in 2015 inked a seven-year, 73,000-square-foot lease in the building through 2023, though it has less than 70,000 square feet in the property under lease today. Comcast is exiting the property, and relocating employees into nearby suburban offices in Oak Brook, Libertyville as well as its Chicago space, while some are being allowed to work remotely from home, a Comcast spokesperson said.

A spokesperson for Bridge declined to comment when asked why it didn’t try to reload the building’s tenant roster. Optum didn’t return requests for comment.

Bridge wouldn’t be the first investor in the suburban Chicago office market to suffer a loss this year. Hawaii-based James Campbell Company sold for $10 million less than its 2015 purchase price when it made a deal to move a 281,000-square-foot Downers Grove office to Shaya Prager’s Opal Holdings company for $52 million, or $185 per square foot. The seller also paid out an additional $12 million for leasing commissions and improvements during its ownership.

Windy Point is set to be even emptier, unless a new owner quickly lands some tenants. It will hit 80 percent vacant starting in March once the cuts to the tenant footprints take hold. The buyer of the property will receive a $4.5 million payment in late January as a contractual payment for the cuts to the leases, according to marketing materials.

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