A Chicago-based investor snapped up a West Loop office building for a fraction of its last appraisal in 2012.
A venture backed by Igor Gabal snagged 300 West Adams Street at a nearly 90 percent discount from that $38 million appraisal, Crain’s reported. The 240,000-square-foot building, which is subject to a ground lease, traded for $4 million, less than $17 per square foot.
An entity tied to Morgan Stanley was the seller of the previously distressed building.
The 12-story building is 50 percent occupied, and was appealing because of its relatively small scale, Gabal told the outlet. The gothic-revival building is well-suited for a conversion to smaller office spaces, which could be marketed to companies that are looking to scale back their office space without getting rid of it entirely.
The building’s previous owner was unable to hold on the building long enough to make a similar move. But that company still benefits from Gabal’s ownership.
In 2012, Bryn-Mawr, Pennsylvania, based Alliance HP paid $51 million for the property. The company separated the building and the land into two entities. Although the firm was forced to surrender the building via deed in lieu of foreclosure in 2021, it maintained its ownership of the land.
Now Gabal is subject to the terms of the 99-year ground lease. The lease started at $1 million a year in 2012 and increases by 3 percent each year until 2042, after which it plateaus to $2.5 million for the remainder of the lease.
The building is a worthy investment in part because it already generates some income from current leases, Gabal told the outlet.
The property made $1.7 million in net operating income in 2022, according to the loan information. Although that was half of what it generated five years earlier, it is enough to get started, Gabal said. The low purchase price meant he did not need to take on debt to buy the building, giving him more flexibility with his plans for the property.
— Emma Whalen
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