Altera Fund Advisors to Buy Chicago Lab from Sterling Bay

A Dallas investor betting on healthcare real estate is swooping into Chicago’s North Side, taking a distressed lab building off Sterling Bay’s hands as the developer sheds property.

Altera Fund Advisors is in contract to buy the Lincoln Park Bioscience Center at 2430 North Halsted Street and plans to convert the five-story, 125,000-square-foot building into a multi-tenant medical outpatient facility, Costar reported.

The deal is expected to close later this year, Altera CEO Terry Quinn told the outlet. The deal marked Altera’s second Chicago-area purchase after a property in Oak Lawn.

The building’s sellers — Sterling Bay and partner Harrison Street — teamed up with lender Capital One to market the asset last year through CBRE.

The sale price is likely far below the property’s $64 million debt, people familiar with the deal told the outlet.

It’s another sign of how far the once-hyped life sciences play has fallen. Sterling Bay bought the former Ann & Robert H. Lurie Children’s Hospital site for $24 million in 2018 and poured another $19 million into renovations to launch it as a biotech incubator.

But demand for lab space has cooled since the pandemic, leaving the Halsted property 40 percent leased when it hit the market.

It also follows a falling out last year between Sterling Bay and one of the building’s major tenants — Massachusetts-based BioLabs — as Sterling Bay sued to evict and asked a Cook County judge to award more than $2.7 million in damages over a dispute regarding the tenant’s lease of 30,000-square-feet of the Halsted building.

BioLabs operates similarly to coworking providers, by renting large blocks of real estate that it can turn into lab space. It then subleases the space to early-stage companies in need of research equipment and workspace on more flexible and briefer terms than standard office leases. It operates across 17 other locations in the U.S., Europe and Japan according to its website.

The slowdown has also hammered Sterling Bay’s $6 billion Lincoln Yards megaproject nearby, where Bank OZK recently seized 28 acres and sold them to JDL Development and Kayne Anderson Real Estate for $84 million to make way for a new residential district called Foundry Park.

Quinn said Altera plans to reposition the Halsted building as a Class A medical office property catering to outpatient users. Quinn added that the structure’s HVAC and electrical systems make it ideal for clinical tenants. O’Donnell Commercial Real Estate will handle leasing, with available blocks ranging from 2,000 to 50,000 square feet.

The deal is part of Altera’s strategy of buying healthcare assets at a “substantial discount to replacement cost.”

— Eric Weilbacher