Olen Properties Corp. has signed its largest and most valuable lease ever while keeping its anchor tenant in place at a skyscraper the Newport Beach-based real estate company owns in Chicago.
The privately held real estate investor recently completed a deal with Sidley Austin LLP, one of the country’s largest law firms, that retains the tenant at One S. Dearborn St., a 40-story tower in the Loop district.
The new lease totals 575,000 square feet, keeping the firm as the largest tenant at the 810,000-square-foot building into 2030.
Financial terms of the deal weren’t disclosed, but Olen president Igor Olenicoff said the lease extension should generate in excess of $400 million in rents over its term.
Monthly class A rents in the central business district of Chicago average about $3.33 per square foot, according to data from the local office of brokerage Savills Studley Inc.
“It was a huge deal for us to conclude this quite long extension with this quality firm,” Olenicoff said.
It was “quite an accomplishment for Olen, since they were being courted by several brand-new high rises” in the region, he said.
At least two developers were attempting to poach Sidley Austin as an anchor tenant for office towers they’ve proposed for Chicago, and owners of existing buildings there wanted it to fill empty space, according to a report in Crain’s Chicago Business.
Four office towers have been built in downtown Chicago during the current real estate construction cycle, according to the newspaper.
Debt-Free
Sidley Austin has been the largest tenant at One South Dearborn since Houston-based developer Hines Interests completed the tower in 2005. Its initial lease, struck before the building was completed, reportedly was for 500,000 square feet.
The firm employs more than 500 lawyers in its Chicago office, which is its largest, according to its website. It also has a significant presence in Los Angeles.
Olen bought the tower in 2006 for a reported $362 million, or about $447 per square foot, in the company’s biggest-ever acquisition. That was a record-setting price per square foot for a tower in the city at the time; asking prices at some high-end Chicago skyscrapers now approach $700 per square foot.
Orange County investors have taken a shine to the area; Newport Beach-based Irvine Co. now owns three towers in the city, including one 60-story office it bought in 2014 from an affiliate of KBS Realty Advisors in Newport Beach.
That tower went for about $850 million in what’s believed to be the priciest single-building office buy any Orange County real estate company has ever made.
Olen has no other office holdings in the city, although Olenicoff —one of OC’s wealthiest people, with an estimated fortune of $4 billion—previously said he’s lent money to the owners of a Chicago hotel.
Debt isn’t an issue for One South Dearborn; Olenicoff said Olen recently repaid the mortgage entirely on the building at around the time of Sidley Austin’s renewal.
“Needless to say, we are pleased to own such an asset debt-free,” he said.
Features that were built specifically for Sidley Austin include a private cafe, conference center and fitness center.
The law firm said in a statement that its new lease would include “a few design renovations to leverage unused space for collaborative areas and maximize the amount of natural light.”
