Two Chicago investors have teamed up to buy a huge Westlake office campus.
GlenStar and partner Singerman Real Estate have acquired eight buildings in the Solana business park on State Highway 114.
The purchase includes more than 1 million square feet of offices along with the Solana Fitness Club and land for additional development.
The Solana development, originally built for IBM in the 1980s, has been up for grabs since last summer.
The landmark property was sold by Blackstone Group and its affiliate, Equity Office Properties, which purchased the development in 2014.
“With the recent corporate relocations and significant construction activity in the market, this was a unique opportunity to acquire an office campus in a high-growth area and deploy our proven redevelopment strategy,” GlenStar principal Matt Omundson said in a statement. “We are looking forward to repositioning and rebranding the asset.”
Terms of the sale were not disclosed. Holliday Fenoglio Fowler LP marketed the property for sale.
When the buildings hit the market in 2018, they were less than 40% leased.
Major business tenants include Sabre Corp., Verizon, Goosehead Insurance and Marsh & McLennan.
The just-sold office complex called the Terrace at Solana has six five-story buildings with 375,000 square feet, a 309,000-square-foot, six-story building and a three-story, 129,000-square-foot building.
The new owners say they plan to “inject significant capital to create a truly contemporary campus setting with enhanced tenant amenities and activated outdoor corridors.”
Redevelopment plans include a new conference center, a tenant-only fitness center, a tenant lounge, and patios and entertainment space.
“Today’s discerning tenants want more from their office locations,” Omundson said.
The previous owners, Blackstone Group and Equity Office Properties, already invested about $50 million to upgrade the entire Solana development. The sale also includes about 20 acres for additional construction.
When Solana was started in 1986, the business park was on the edge of North Texas’ urban growth.
Award-winning Mexican architect Ricardo Legorreta originally designed the campus, and almost 3,000 IBM employees were housed at Solana when it opened.
The project is now between DFW International Airport and Alliance Airport in one of the fastest-growing areas of North Texas.
Charles Schwab and TD Ameritrade have large new office campuses nearby. And Sabre Corp., Deloitte and Fidelity Investments have thousands of workers in the same area.
The Solana purchase is GlenStar’s second major property investment in North Texas. The firm is renovating the more than 1 million-square-foot Energy Square office complex on North Central Expressway in North Dallas.
During the past decade, GlenStar has bought more than 8 million square feet of U.S. office, retail, residential and medical buildings.
Singerman Real Estate is making its first Dallas-Fort Worth acquisition with the Westlake deal. Since 2010, the company has been part of $2.5 billion of investments in office, retail, hotel, industrial and multifamily projects.
WiredScore, the international standard for cutting-edge internet connectivity in office buildings, announced that GlenStar is the first landlord to achieve certification across a portfolio of Class A commercial office properties in the Chicago suburbs.
Schaumburg Corporate Center in Schaumburg, Illinois and Presidents Plaza in Chicago earned the Wired Certified Gold designation while Continental Towers, a three-building office complex in Rolling Meadows, Illinois, earned a Wired Certified Platinum and two Wired Certified Gold designations. Designations for the 2.7 million square feet are based on the buildings’ best-in-class connectivity, technological infrastructure and readiness to adopt to emerging technologies. They join more than 1,700 Wired certified buildings worldwide offering top-notch tech capabilities.
“In order to attract and retain tenants in the suburban markets, we understand that, as owners, it requires more than just having the physical amenities that are becoming commonplace for today’s tenants,” said GlenStar principal, Michael Klein. “Prioritizing connectivity and incorporating it into our overall tenant experience is essential for us to deliver value and differentiate our properties in the market.”
In pursuing Wired certification, the properties underwent a comprehensive certification process that evaluated the aspects of digital infrastructure that enable a seamless connectivity experience in which office tenants are able to stay online and maintain productivity levels.
Upon review of the project’s technical elements—including internet service providers available to tenants, infrastructure redundancy, connection access points and readiness to meet future tenant needs—a Wired certification level is assigned based on the official standards developed by WiredScore and its connectivity advisory board.
GlenStar Properties pioneered Wired certification in Chicago’s CBD, rolling out the rating system at 141 W. Jackson, which attained Wired Certified Platinum, and 55 E. Monroe, which achieved Wired Certified Gold. With the suburban offices, GlenStar has now certified nearly six million square feet of office space across Chicago’s downtown and suburban markets.
“Technology, specifically digital connectivity, is a key component in retaining tenants and ensuring their productivity needs are met,” said Christine Torres, who leads the Chicago market for WiredScore. “As the first landlord to pursue Wired certification across a portfolio of Class A commercial office properties in the Chicago suburbs, the team at GlenStar has positioned itself as leaders in providing a tech-forward tenant experience.”
Leasing activity in Chicago’s suburbs slowed down in the first quarter of 2019. However, pockets of the market, including O’Hare and Oak Brook, remain tight, leading to asking rents in these areas to reach an all-time high.
According to a Q1 suburban office performance synopsis by Colliers International Chicago, the average asking gross direct rent was $21.39 per square foot across the entirety of the suburban Chicago office market. This is up from $21.32 per square foot last quarter and well above the $20.99 per square foot that landlords were asking for in the first quarter of 2018.
Mid-sized tenants continue to offer the most relocation potential. There are currently more than 100 tenants who need space ranging from 10,000 to 50,000 square feet that are actively on the hunt for offices throughout the suburban market. The bulk of these, 40 percent, have shown interest in the Northwest market.
Older and poorly located suburban office properties continue to be purchased for adaptive reuse or demolition. As an example, Somerset Development and Triangle Capital Group recently acquired the former AT&T corporate campus in Hoffman Estates, Illinois. They will develop the 150-acre property into Chicagoland’s first “Metroburb”—a self-contained urban core in suburbia, porting over the Bell Works concept that Somerset developed in Holmdel, New Jersey. Colliers will serve as exclusive broker for the project.
Other suburban office renovations include the Motorola headquarters in Schaumburg, the Aon headquarters in Glenview and the Nokia property in Naperville. McDonald’s is seeking a buyer for its former home base in Oak Brook. GlenStar recently renovated the 1-million-square-foot Schaumburg Corporate Center. with a state-of-the-art conference center, club room, new parking deck and fully updated atrium while Franklin Partners is redeveloping the former OfficeMax headqurters in Naperville, rebranded as The Shuman, aiming to create a suburban destination for multiple office tenants with downtown-like amenities.
After adding positive absorption in the fourth quarter of 2018, the suburban office market fluctuated to start the year with 448,890 square feet of negative absorption. Overall vacancy in the suburbs rose 40 basis points to 20.5 percent, exactly where it was two years ago during the same time frame.
Class A vacancy also increased 40 basis points, rising to 20.7 percent. The Lisle/Naperville area had the highest Class A vacancy last quarter at 25.9 percent while the situation was a little tighter at 12.5 percent for O’Hare Class A office vacancy.
Leasing activity, including new leases and lease expansions, totaled 1.1 million square feet in the first quarter. This is down from 2.5 million square feet in the fourth quarter of 2018. Year-to-date, the entire Chicago suburan office market witnessed a negative absorption of 448,890 square feet—more than half of which was Class A space.
Ten new leases or lease expansions of 15,000 square feet or larger were signed throughout the suburbs during the first quarter of 2019. Investment and user sale velocity continued in the suburban office market as nine assets traded hands in the first quarter of 2019, with five others currently under contract.
The Colliers Chicago report forecasts that “trophy” Class A vacancies will decline throughout the year, based on recent activity in the market. As millennials start moving to the suburbs, however, the migration of companies into the CBD may begin to slow, if not turn around altogether. Owners and developers completing renovations of dated Class A/B properties into modern workplaces are banking on a renewed interest in the suburban office market.
Partnering with Best Companies Group, Crain’s surveyed 8,800 employees at Chicago-based companies to find the top places to work. Glenstar made the list, coming in at #56.
On Thursday, September 20, 2018, REjournals hosted the 3rd annual Suburban Office Market Conference, co-hosted by GlenStar Properties. More than 150 industry professionals flocked to the Schaumburg Corporate Center to hear about the latest trends on the office market outside the urban core.
Stevhanie Howard, senior broker at Foresite Realty Partners, emceed the event and provided introductory remarks. The first panel, moderated by Kevin Clifton, executive managing director at Cushman & Wakefield, took a deep dive into the state of the suburban office market, including current investment trends, financing strategies and which areas are most attractive for new development.
Panelists included Michael Klein, principal at GlenStar Properties; Bryan Rosenberg, director at HFF; Michael J. Rolfs, partner at Hamilton Partners; Christine Torres, head of Chicago at WiredScore and Jason Wurtz, executive vice president, office services at NAI Hiffman.
So where is the suburban office market headed? According to Klein, “There is growth in the suburbs, but it rarely gets talked about.” He pointed to Medline Industries as an example. The global medical supply manufacturer and distributor moved into a new, 530,000-square-foot headquarters in Northfield last year.
The “M” word—millennial—was invoked several times as the panelists prognosticated on the suburbs’ future. Wurtz believes that the young generation will move to the suburbs just as their parents did, and companies will have to follow them. Rolfs agreed.
“We’re going to see a bit of a reverse migration as the millennials grow up and get married,” Rolfs said. “Companies follow labor, and we have a great labor pool in the suburbs. Smaller businesses are saying that they don’t need to be downtown anymore.”
More than $158 million was spent on the five largest Chicago-area office property transactions in August.
Of that total, more than 75 percent of it came in one deal: the $121.5 million sale of an office complex in the northwest suburbs. Two of the five biggest office deals in August were for properties in the suburbs, according to a review of Cook County property records.
1701 Golf Road | $121.5 million
Rubenstein Partners recorded the priciest office buy in August with the $121.5 million purchase of the Continental Towers complex in Rolling Meadows. The price is a substantial increase over the complex’s previous sale, when GlenStar Properties and Walton Street Capital picked up the building for $58.5 million in 2013 after previous owner Prime Realty Group defaulted on its loan.
1029 West Madison Street | $13.1 million
The Feil Organization’s latest acquisition in the red hot West Loop was the $13.1 million purchase of an office building from owner-tenant Schafer Condon Carter, an advertising agency. In 2016, New York-based Feil spent $35 million for five properties in Fulton Market, and it paid $23 million in 2017 for 730 North Franklin Street in River North.
1200 North State Street | $10.1 million
Newcastle Limited bought this three-story mixed-use building on the Near North Side for $10.1 million from from a trust, records show. The firm also recently spent more than $17 million for a Gold Coast residential tower and a retail building in Lincoln Park.
7600 West College Drive | $7.85 million
A suburban medical office building switch hands between two companies that specialize in medical real estate. Arizona-based Everest Healthcare Properties bought the Palos Heights building for $7.85 million from Florida-based Rendina Healthcare Real Estate.
1400 West Monroe Street | $6 million
New York-based JK Equities bought a four-story skilled-care facility in the West Loop for $6 million. The building was sold by Symphony PAN, a national post-acute care provider. The deal was structured as a lease-buyback, according to a press release from Interra Realty, the brokerage that represented on both sides in the deal.
Trustees cleared the way for a huge athletic and recreational facility at the site of a vacant office complex at Half Day Road and I-94.
LINCOLNSHIRE, IL — Lincolnshire village trustees Monday advanced a plan to tear down a largely vacant office park and replace it with a huge indoor sports facility and other ventures as part of a new mixed-use development. The board rezoned 40 acres on the northwest corner of Half Day Road and I-94 from an office to business district and issue a special use permit for development set to be anchored by the massive “sports and wellness complex.”
The Lincolnshire Village Board Monday gave its preliminary approval for plans to turn the site into a 450,000-square-foot recreation and fitness complex called The St. James, as well as a hotel, a restaurant and “a public or private recreation facility to be identified in the future,” according to a memo from village staff. The developer said the other tenants would not commit until the site was re-zoned.
The St. James Director of Development Michael Kerin said the Lincolnshire site is particularly attractive for the recreation company’s second facility. Its first location is in the D.C. suburbs. A 50,000-square-foot athletic, health and retail complex has a grand opening planned for next month in Springfield, Virginia.
The proposed two-story Lincolnshire multi-sport facility would include to have the only FIFA regulation-sized turf soccer field in the region, two NHL regulation-sized ice rinks, an Olympic-sized pool, a water park, four basketball courts, a fitness center, a gym, gymnastic center, spa, health club, an “active entertainment center” – a mix of climbing structures, trampolines and zip lines with party and gaming areas – among other things.
Glenstar Properties will build a massive sports and entertainment complex in Lincolnshire, after village officials voted to approve the massive project.
The Chicago-based developer will construct The St. James, a 450,000-square-foot facility on 43 acres, according to the Daily Herald. The complex will be operated by St. James, a Virginia-based company.
The sprawling entertainment center will include sa FIFA soccer regulation field house, two ice hockey rinks and a water park. The property is at the intersection of Interstate 94 and Half Day Road, about 30 miles north of downtown Chicago, The site was previously home to the medical supply manufacturer Medline.
The complex will also have an Olympic-size pool, a 50,000-square-foot fitness center and a 25,000-square-foot “active entertainment center” with ziplines and rock climbing. GlenStar had also proposed a Topgolf driving range, but village leaders vetoed that plan.
Glenstar owns the Chicago Board of Trade building at 141 West Jackson Boulevard and the office towers at 55 and 65 East Monroe Street, as well as a dozen other properties around Illinois and two in Texas.
Earlier this month, Rubenstein Partners paid $121.5 million to buy into Glenstar’s Continential Office Towers complex in Rolling Meadows, which Glenstar bought in 2013 for $58.5 million before spending $30 million on renovations.