A New Jersey-based real estate company paid a little over $87 per square foot to buy a suburban Chicago office and industrial complex, in a deal that barely covered the property’s mortgage debt.
Avalair Group’s $23 million purchase of the Woodlake Corporate Park, at 800-1080 Parkview Boulevard, from real estate investor Michael Brennan resulted in a 20 percent loss in property value.
Brennan’s Rosemont-based firm Brennan Investment Group had owned the 263,000-square-foot multi-building property since 2016, public records show.
Brennan’s firm paid $28 million for the assets in 2016, when it bought them from a venture of UBS Asset Management, according to DuPage County deeds.
The 2016 deal was financed with a $22 million mortgage from Aurora National Life Assurance, meaning Brennan exited the property at a price that was just enough to pay off the debt, but with little equity left over.
Avalair financed its purchase with a $15.8 million mortgage from Alliant Credit Union, records show.
Neither Brennan nor Avalair immediately responded to requests for comment.
The loss in value extends a rough stretch for commercial real estate markets in Chicago’s western suburbs, as offices stay out of favor with institutional investors, and rising interest rates squeeze landlords who borrowed at the costs of yesteryear.
The Woodlake Corporate Park sits on 29 acres along the eastern edge of Interstate 355. It was developed in the early 1990s by Alter, a firm based in the suburbs led by Michael Alter, the owner of WNBA’s Chicago Sky.
Brennan Investment Group focuses on industrial properties and owns 52 million square feet with a total value of $6 billion across 27 states, according to its website.
Also in DuPage County last month, Blackstone sold the Oakbrook Terrace Tower office — Illinois’ tallest building outside downtown Chicago — for $60 million to a venture of the Napleton car dealer family. The price was far less than the more than $100 million the seller originally sought when it marketed the asset. Plus, Data center developer NTT just scooped up two Itasca office buildings for $27.5 million, with plans to tear them down and rebuild the property as cloud storage facilities. The play demonstrates how offices are no longer the best use for many properties in Chicagoland and across the nation.
While the industrial market has been a bright spot since the pandemic began, leading to all-time-low vacancy rates in Chicago-area warehouses in recent months, developers have responded by putting a record amount of new industrial construction into their pipelines. The increasing supply has calmed industrial rents, which continuously rose during the pandemic.
There is more momentum behind the industrial market than for struggling offices, as illustrated by Brennan’s efforts elsewhere in Chicagoland. Brennan is pursuing a $100 million office-to-industrial conversion of a 485,000-square-foot building, at 3800 Golf Road in Rolling Meadows. The property became subject to a lender’s foreclosure lawsuit over a $30 million loan to its landlord, Spear Street Capital.