Fred Lewis’ Sentinel buys Bannockburn offices for $29M

Even with a nearly fully leased building, seller Axial handed slight loss

Sentinel Net Lease's Fred Lewis with Bannockburn Corporate Center at 3000 Lakeside Drive
Sentinel Net Lease's Fred Lewis with Bannockburn Corporate Center at 3000 Lakeside Drive (Sentinel Net Lease, Bannockburn Corporate Center)

If Andy Deckas came to the suburban Chicago office market for stability, he found it despite a volatile period for the asset class featuring record high vacancies and teardowns of big office corporate campuses into warehouse complexes.

With a sale of a Bannockburn office building for $28.6 million this month, Deckas’ Axial Real Estate Advisors found its value in the northern suburb barely budged since the firm bought it in 2016.

An affiliate of Baltimore-based Sentinel Net Lease bought the three-story, 211,000-square-foot Bannockburn Corporate Center at 3000 Lakeside Drive for $28.6 million, according to Lake County records. The deal marked a slight dip in value from when an Axial predecessor paid about $29.3 million for the property in 2016, records show.

Neither Axial nor Sentinel responded to requests for comment on the latest deal. But in an online presentation for its investors, Sentinel called its acquisition cost of $136 per square foot for the deal “a deep discount to replacement costs, which provides a defensive barrier against new construction competition.” The presentation said the firm is buying the building with a projected net operating income of about $2.7 million, and a cap rate, or annual rate of return, of 9.5 percent.

The deal stands out in Chicago’s suburban office market, which faces a record-high vacancy rate of 29 percent as of last month. Some office properties struggling with downsizing tenants — such as the 10-building Baxter International campus also in Lake County — are getting teed up for teardowns so developers can convert big offices into logistics facilities.

The Bannockburn property, however, was 92 percent leased when it hit the market in July, according to JLL marketing materials.

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The Class A building’s two biggest tenants are infusion therapy provider Option Care Health, whose lease runs through 2032, and fleet management company Donlen. Axial reportedly put about $750,000 into upgrading the property’s amenities in 2018.

Axial is also testing the Chicago-area office market with a fully-leased, 25-year-old building in Vernon Hills, which it put on the market late last year. The firm is asking $31.4 million for the 190,000-square-foot property at 75 North Fairway Drive, slightly more than Axial’s predecessor paid for the building in 2015.

That building’s largest tenant is a division of medical device company BD, which has a lease for about three-quarters of the property through November 2026. Pharmaceutical company Abbvie has a lease for the remaining space set to expire at the end of October.

Helmed by Fred Lewis, privately-owned Sentinel’s leaders throughout their careers have completed a combined $6.4 billion of real estate transactions across more than 75 U.S. markets, according to the firm’s website. It also owns a Tesla retail store and service center in Schaumburg.

The final paragraph of this story was updated to clarify that Sentinel’s leadership, rather than the firm itself, has completed a combined $6.4 billion worth of real estate deals.

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