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KBS Realty To Buy Chicago Tower for Record $655M

Downtown Chicago office tower rendering: KBS Realty buying for 0 per square foot

Newport Beach’s KBS Realty Advisors LLC has struck a deal to buy a Chicago skyscraper in what appears to be the priciest office buy an Orange County real estate company’s ever made.

KBS, a private equity real estate investor that’s been one of the most active buyers of commercial property across the country in the past few years, has agreed to buy 300 N. LaSalle Drive, a recently built, 60-story office tower in downtown Chicago.

The price for the 1.3 million-square-foot tower is about $655 million, or roughly $503 per square foot, according to regulatory filings.

That would shatter per-square-foot records for an office sale in Chicago and is the priciest sale the Windy City’s seen since 2004, when the Sears Tower—now Willis Tower—traded hands for $840 million.

The transaction first was reported in Crain’s Chicago Business. The deal’s yet to close.

Officials with KBS declined to comment.

The skyscraper opened last year. It was built by Houston-based developer Hines Interests LP. Law firm Kirkland & Ellis LLP leases more than half the space at the tower, which is reported to be 93% full.

When Hines put the Chicago building on the market earlier this year, local real estate watchers expected the skyscraper to trade for $570 million to $620 million, according to Crain’s.

Hines—which last month also sold its best-known OC building, Irvine’s 2211 Michelson tower, for about $103 million—appears to have exceeded expectations in the pending sale.

It’s a bit of anomaly for the Chicago market, which has seen the amount of office sales decline since 2006, when close to $5.3 billion in transactions took place, according to Bruce Miller, managing director for the Chicago office of Jones Lang LaSalle Inc.

By 2008, sales there had dropped to $1.1 billion. Last year, there was just $60 million worth of downtown office sales, according to Miller, who handles investment sales for the Chicago-based brokerage.

Unlike OC, distressed deals hitting downtown Chicago have been few and far between, he said.

At $655 million, KBS’s latest purchase would eclipse a number of other high-dollar trophy office deals that OC companies have made across the country the past decade.

Not including portfolio buys, the next largest reported office sale an OC real estate investor has made in the past decade also was in Chicago, where Newport Beach’s Olen Properties Corp. paid $350 million in 2006 for a 40-story skyscraper at One South Dearborn.

That 828,538-square-foot building—which like the North LaSalle tower was built and sold by Hines—traded hands for $422 per square foot.

Olen’s purchase had set the high-water mark for a Chicago tower sale on a per-square-foot basis until the KBS deal for 300 N. LaSalle.

The high sales prices for both deals can be justified, according to Miller.

“Those are two of the best properties in all of downtown Chicago. They’re going to remain trophy properties,” he said.

In comparison, trophy offices in OC have traded for $300 to $380 per square foot in the past two years, although a few buildings traded for more than $400 per square foot at the peak of the market.

KBS Background

Also known as Koll Bren Schreiber Realty Advisors, KBS Realty is a venture of Peter Bren, brother of Irvine Company Chairman Donald Bren, and former Koll Development Co. executive Chuck Schreiber Jr.

KBS was founded in 1992, and has been involved in nearly $17 billion in deals.

The company’s invested nearly $4 billion in the past five years alone and has been by far the most active OC-based real estate investor in the past three years.

KBS invests money for pension funds, government funds, life insurers and other institutional and individual investors.

The company’s KBS Real Estate Investment Trust II, a fund started in 2008 that’s raised $1.1 billion from individual investors, is buying the Chicago tower.

Among other Chicago-area deals, the company has invested in a pair of loans tied to two city offices worth about $90 million through one of its real estate investment trusts.

The company’s not believed to directly own any other downtown Chicago offices, although it does have a few other Illinois buildings in its portfolio.

The big-dollar Chicago deal also comes on the heels of a $68.4 million office deal KBS and its affiliates recently closed in the Washington, D.C., suburb of Dulles, Va., and a $40.5 million office sale in the Scripps Ranch area of San Diego County.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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