Value-add, Class A Office tower within Chicago s West Loop E X E C U T I V E S U M M A R Y
E X E C U T I V E S U M M A R Y Holliday Fenoglio Fowler, L.P. ( HFF ) is pleased to present 525 West Van Buren (the Property ), a 16-story Class A office tower located in the heart of the prestigious West Loop office market, within Chicago s central business district ( CBD ). The Property, completed in 2002, is located in immediate proximity to Chicago s two major commuter rail stations, Union Station and Ogilvie Transportation Center, providing convenient access from all suburban locations. 525 West Van Buren is 77.8% leased to some of the finest internationally known, investment grade tenants including the U.S. Federal Government, Akzo Nobel, Inc., and North American Company for Life and Health Insurance. The Property contains approximately 522,809 rentable square feet ( RSF ) of space and a 40-space, executive indoor parking garage. 525 West Van Buren offers the rare combination of a trophy quality asset, credit tenancy and a premier location. LOCATION KEY INVESTMENT HIGHLIGHTS 525 West Van Buren, Chicago, Illinois BUILDING TYPE Class A Office DATE COMPLETED 2002 DEVELOPER Development Resources, Inc. ARCHITECT OWP/P Architects TOTAL PROPERTY RSF 522,809 OCCUPANCY 77.8% FLOORS 16 stories INDOOR PARKING 40-spaces AVERAGE FLOOR PLATE RSF 33,600 Entrance 2
` E X E C U T I V E S U M M A R Y Investment Grade Tenancy The Property features an exceptional investment grade tenancy that is consistent with the trophy quality of the building. 525 West Van Buren benefits from a diverse roster of tenants engaged in financial services, government, diversified manufacturing, transportation, and non-profit sectors. Over 92% of in-place base rental revenue is generated from investment grade tenants (BBBor better from Standard and Poors). Investment grade tenants include the U.S. Federal Government ( GSA ), Akzo Nobel, Inc., and North American Company for Life and Health Insurance. The GSA leases space for the Department of Homeland Security, the Department of Treasury, the Department of Justice and the Internal Revenue Service. Akzo Nobel is a Netherlands-based Global Fortune 500 Company serving customers throughout the world with coatings and chemicals. The firm employs approximately 50,000 people in more than 80 countries. North American Company for Life and Health Insurance is a leading Non- Investment Grade 8% INVESTMENT GRADE TENANCY Investment Grade 92% provider of life insurance products across the United States. With nearly 120 years in business, North American has 300 employees and specializes in mortality protection and life insurance for the upscale market. SUMMARY OF PRIMARY TENANTS Tenant RSF % of Building Current Rent/RSF Lease Expires W.A.L.T. S&P Credit Rating Gov't Services Administration 187,620 35.9% $36.93 Gross Various 6.4 Yrs AA+ Akzo Nobel 90,138 17.2% $22.50 Net Dec-19 4.7 Yrs BBB+ North American Co. 41,607 8.0% $18.50 Net Feb-22 6.9 Yrs A+ Institute of Food Technologists 28,558 5.5% $27.36 Net Mar-25 10.1 Yrs N/R RLI Insurance 19,079 3.6% $19.62 Net Oct-23 8.6 Yrs A+ Total/Weighted Average 367,002 70.2% 6.4 Yrs Akzo Nobel Lobby 3
E X E C U T I V E S U M M A R Y Stable Cash Flow With 6.4 years of weighted average lease term to a host of investment grade tenants, the property offers stable cash flow throughout the life of the investment. The GSA tenancy is particularly stable evidenced by the recent renewals of the Secret Service and the ATF with an average landlord contribution of approximately $10.00 PSF. Significant Upside Potential The property comes with significant upside potential with 22.2% vacancy. This vacancy includes two full floors, 2 and 11, with the majority of the current vacancy located in the high rise floors 10-14. The 2nd floor vacancy is unique as it can offer a tenant a private roof-top deck (pictured) and signage with frontage to the 500,000-plus daily commuters on the Eisenhower Expressway. The location surrounding the property has continued to improve in recent years, as evidenced by Hillshire Brands recent Headquarters relocation two blocks West, and will continue with the redevelopment of the Old Post Office Building. Built between 1921 and 1934, the Art Deco Old Post Office building is a prominent landmarked structure with a storied history that sits across Canal street from the Property. Today, the Old Post Office sits vacant awaiting redevelopment and is currently on the market for sale. The combined parcels comprise over 12 acres of level urban-infill development land with the potential for 10 million gross square feet. Current plans account for up to 1,240 hotel rooms, 6,769 residential units, and 4,548 car parking spaces. Rendering of 2nd Floor Terrace 4
E X E C U T I V E S U M M A R Y Prime West Loop Location Canal Clinton Corridor 525 West Van Buren is located at the southwest corner of Van Buren and Canal Streets in the heart of the West Loop, Chicago s most dynamic and fastest growing submarket. The West Loop is the clear office location of choice for the city s financial and business services tenants as well as the top destination for technology tenants, as evidenced by the recent relocations of Twitter, Uber, and GoGo Inc. to the West Loop. Other notable relocations to the West Loop include Hillshire Brands corporate headquarters relocation into 233,000 at 400 S. Jefferson, one block west of the 525 West Van Buren, W.W. Grainger and Newark Corp. The West Loop s Canal Clinton Corridor is a hotbed of recent development and investment sales activity. Since 2000, public and private development has focused on the Canal Clinton Corridor, primarily because Chicago s two major commuter rail stations anchor the area. This vibrant area, located between the Chicago River and the Kennedy Expressway, has come to exemplify Chicago s status as a true 24/7 city. The growing population of young, educated workers will continue to attract employers to locate within the Canal Clinton Corridor. Within the Corridor, there have been numerous new condominium and apartment developments, health clubs, restaurants, parks, schools and shopping centers. Willis Tower John Hancock Tower 500 W Madison Presidential Towers 10 & 120 S Riverside Huron Consulting H.Q. Boulevard Old Post Office Can De reet treet Adams S al S Hillshire Brands H.Q. sp tree t ss ne lai Halsted St 200 S Wacker 222 S Riverside Union Station 94 90 Street et tre Van Buren 311 S Wacker 10 & 30 S Wacker WEST LOOP Jackson A Cen 290 Je ffe rs on St re et eet on Str Harris 5
E X E C U T I V E S U M M A R Y Best In Class Asset Quality 525 West Van Buren represents the next generation of office buildings. Designed to meet the demands of the modern office environment, 525 West Van Buren combines form and function to accommodate the technological and space requirements of today and the possibilities of the future. Opened in 2002, 525 West Van Buren is a 16-story, Class A office property that features a wide range of modern building systems and amenities. The Property consists of approximately 522,809 RSF and provides tenants with 40 secure, indoor executive parking spaces as well as an on site cafe. Current ownership recently completed a renovation of the Mezzanine floor by adding several tenant amenities including a Wi-Fi lounge, a conference center that seats up to 80 people, a state-of-the-art fitness center with locker room and showers, and a bike room with a capacity for 56 bikes. The Property is currently undergoing LEED Gold Certification which is expected to be completed by March 2015. The column-free floor plates average 33,600 RSF, catering effectively to full-floor tenants while also allowing efficient layouts for small to mid-sized firms. Seven of the 16 floors at the Property are single tenant floors. 525 West Van Buren has a history of attracting some of the best tenants in the West Loop Submarket. As evidenced by the table below, these next generation office buildings (built in 2000 or later) experience a premium in both occupancy and value to the broader Chicago market. This subset of best-in-class assets exhibits an average occupancy rate of 92.6%, a 620 basis point premium to the 86.4% occupancy rate of the Chicago CBD in the fourth quarter of 2014. Furthermore, these properties have traded at an average of $426 PSF. 525 West Van Buren offers an investor the opportunity to purchase a best-in-class asset at a basis substantially less than the average price of similar assets. Building Address NEXT GENERATION CHICAGO OFFICE BUILDINGS (BUILT IN 2000 OR LATER) Owner Name Year Built Number Of Stories Building Class Rentable Building Area Percent Leased 550 W Adams St SEB Immobilien-Investment GmbH 2006 18 A 483,677 95.0% Jan-15 $185,000,000 $382 353 N Clark St Heitman LLC 2009 47 A 1,184,255 93.6% Dec-14 $715,000,000 $604 191 N Wacker Dr Manulife Financial Corporation 2003 37 A 737,759 90.5% Dec-14 $261,000,000 $354 300 N LaSalle St The Irvine Company 2009 60 A 1,302,901 99.5% Jul-14 $850,000,000 $652 550 W Washington Blvd MetLife, Inc. 2000 16 A 372,000 95.4% Jan-13 $111,250,000 $299 540 W Madison St Third Millennium 2003 30 A 1,111,925 70.4% Dec-12 $345,000,000 $310 155 N Wacker Dr John Buck Company 2009 46 A 1,152,953 98.6% Nov-12 $511,750,000 $444 22 W Washington St Prudential Investment Management 2008 16 A 439,434 100.0% Nov-11 $183,500,000 $418 1 N Wacker Dr Hines 2001 50 A 1,373,754 91.0% Sep-11 $610,000,000 $444 71 S Wacker Dr The Irvine Company 2005 48 A 1,490,825 96.6% Dec-10 $625,000,000 $419 1 S Dearborn St Olen Commercial Realty Corporation 2005 40 A 820,915 99.3% Nov-06 $350,000,000 $426 131 S Dearborn St Dearborn Capital Group 2003 37 A 1,504,364 85.7% Nov-06 $560,000,000 $372 111 S Wacker Dr Union Investment 2004 51 A 1,027,683 98.8% Nov-05 $412,121,000 $401 550 W Jackson Blvd The 601W Companies 2001 18 A 406,041 92.4% Oct-05 $126,000,000 $310 555 W Monroe St Principal Financial Group 2002 17 A 418,769 100.0% Nov-04 $119,000,000 $284 550 W Van Buren St Principal Financial Group 2001 17 B 332,608 98.5% Dec-02 $72,000,000 $216 20 W Kinzie St Cornerstone Real Estate Advisers, Inc. 2000 17 A 258,658 91.7% 525 W Van Buren St Northwood Investors, LLC 2000 16 A 522,000 77.8% 567 W Lake St Chicago Transit Authority 2004 12 A 406,000 98.1% Total 15,346,521 92.6% $478,810,730 $426 Sale Date Price Price/ SF 6
E X E C U T I V E S U M M A R Y Superior Transportation Access 525 West Van Buren s location is ideally suited for suburban commuters as well as residents of the City of Chicago. The Property is located adjacent to the CTA s elevated train system ( L ) and is in close proximity to both Union Station and Ogilvy Transportation Center. The Property has benefited from its location, making it easy for commuters entering the CBD via the L (800,000 commuters per day), Union Station (130,000 commuters per day), and Ogilvie Transportation Center (106,000 commuters per day). Commuters by car benefit from the Property s immediate access to the Interstate system via the adjacent on-ramp to Interstate 290 located on Canal Street and abundant adjacent parking. Minimal Capital Expenditure Requirement The building requires minimal capital expenditures throughout the investment period. The new construction quality of the asset assures that the building systems are new and have been maintained to an institutional standard. Current ownership recently spent over $3.2 million on the renovation of the Mezzanine floor into a world-class tenant amenity floor. Furthermore, several tenants have recently renovated their space investing significant amounts of their own money into the space. Discount to Replacement Cost 525 West Van Buren represents a rare opportunity to acquire a trophy quality office tower at a significant discount to replacement cost, with strong in-place cash flow. Reproduction of an asset with such high-quality finishes and innovative and efficient design would cost in excess of $440 per RSF to recreate today. The soaring cost of construction creates an arbitrage opportunity between the escalated replacement costs and the Property s projected residual value. 7
Contact Information HFF Chicago 181 West Madison Suite 3900 Atlanta Chicago, IL 60602 Austin Telephone: 312.528.3650 Fax: 312.528.365 Boston Charlotte Investment Contacts Jaime M. Fink Senior Managing Director 312.528.3683 jfink@hfflp.com Jeffrey M. Bramson Senior Managing Director 312.528.3687 jbramson@hfflp.com Mark B. Katz Managing Director 312.980.3604 mkatz@hfflp.com Bryan D. Rosenberg Analyst 312.300.7282 brosenberg@hfflp.com Financing Contact Trent R. Niederberger Associate Director 312.528.3682 tniederberger@hfflp.com Chicago Denver Dallas Florham Park (NJ) Hartford Houston Indianapolis Los Angeles Miami New York Orange County (CA) Orlando Philadelphia Pittsburgh Portland (OR) San Diego San Francisco Tampa Washington, DC 2015 HFF (Holliday Fenoglio Fowler, L.P.) and HFFS (HFF Securities L.P.) are owned by HFF, Inc. (NYSE: HF). HFF operates out of 23 offices nationwide and is a leading provider of commercial real estate and capital markets services to the U.S. commercial real estate industry. HFF together with its affiliate HFFS offer clients a fully integrated national capital markets platform including debt placement, investment sales, equity placement, advisory services, loan sales and commercial loan servicing. For more information please visit www.hfflp.com or follow HFF on Twitter at www.twitter.com/hff. HFF has been engaged by the owner of the property to market it for sale. Information concerning the property described herein has been obtained from sources other than HFF and we make no representations or warranties, express or implied, as to the accuracy or completeness of such information. Any and all references to age, square footage, income, expenses and any other property specific information are approximate. Any opinions, assumptions, or estimates contained herein are projections only and used for illustrative purposes and may be based on assumptions or due diligence criteria different from that used by a buyer. Buyers should conduct their own independent investigation and rely on those results. The information contained herein is subject to change.