Ares, DRA Advisors Pay $86 Million for Chicagoland Industrial

Getting even a small discount is worth noting for Chicago-area industrial property after the sector’s explosive growth in demand from investors and tenants since the pandemic.

Yet Rosemont-based Venture One along with its equity partner, New York-based DRA Advisors, scored such a deal for a little more than $40 million to buy a big but vacant Joliet warehouse. It dealt its seller, CBRE Investment Management, a slight loss in property value from its 2017 acquisition of the building, according to public records.

The sale of 2700 Ellis Road in Joliet was one of several large industrial transactions involving bigtime CRE firms to close out 2024 in suburban Chicago, where property values in the asset class have started to cool a bit as record amounts of construction deliveries hit the market, causing a bump up in vacancy rates.

In a separate deal, Los Angeles-based Ares Management paid $46 million to Irvine, California-based Panattoni, which developed the 356,000-square-foot warehouse at 2200 Sullivan Road in Aurora, public records show. The price is a little over $129 per square foot.

The deals show how major investment firms remain bullish on Chicagoland’s industrial market even as it stabilizes from a stretch of record-high demand that took occupancy upwards of 95 percent toward the end of the pandemic. Significant chunks of space are available to lease in both buildings, perhaps a result of the record amount of supply developers put into the pipeline toward the end of 2022 and into 2023.

CBRE Investment Management let the 625,000-square-foot Joliet property — all of which is being marketed for lease — go for 64 per square foot, just less than what it paid for the building in 2017, when it acquired the asset as part of a six-building Chicago-area industrial portfolio. The rest of the portfolio, consisting of 726,000 square feet across buildings in New Lenox, Aurora and Carol Stream, was also sold last month to publicly traded REIT Stag Industrial for $74 million, or about $102 per square foot.

CBRE Investment Management paid $54 million ($74 per square foot) for the properties when it bought them, meaning it still came out well ahead on its investment despite the Joliet deal with DRA and Venture amounting to a loss. The Joliet property was the biggest in the CBRE portfolio.

The fact that DRA and Venture One paid essentially the same amount for an empty building today as when it was at least partially leased back in 2017 helps illustrate the remarkable surge in warehouse values, a trend that took hold in major logistics centers across the nation as the pandemic exposed weak points in the U.S. supply chain that tenants rushed to reinforce amid an economy increasingly reliant on home deliveries.

Venture One’s Michael Clewlow touted the Joliet site’s access to heavy power as well as its paved yard space that can store more than 500 trailers outdoors. Venture One and DRA in 2023 also partnered on more than $360 million of Chicago-area industrial real estate deals, which had DRA take over a stake in a huge Venture One portfolio while the latter kept a stake in the properties.

Ares declined to comment, and Panattoni and CBRE Investment Management didn’t return requests for comment.

Panattoni’s sale to Ares in Aurora marked its exit from one of those developments that sprouted up as vacancies were almost non-existent. Panattoni took on a $25 million construction loan from Associated Bank in 2022 to help fund the development, though it’s unknown how much in total the project cost. Ares borrowed nearly $32 million for the deal from an affiliate of Invesco Real Estate, property records show.

Chicagoland’s industrial vacancy rate held steady at 4.9 percent in the third quarter last year, the latest data available, despite a 37.5 percent dropoff in leasing from the previous quarter to 6 million square feet, according to Colliers. Positive net absorption and strong demand for mid-sized spaces — those between 20,000 and 60,000 square feet — balanced reduced user demand and new supply. Build-to-suit projects dominate the market for new supply, comprising 80 percent of the development pipeline.