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Toronto Firm to Buy Canadian Bank's U.S. Headquarters in Chicago for $155.5 Million

By Grabbing CIBC Highrise, Shareholder Says Slate REIT Can Get a 'TD Tower' for Fraction of Price in Windy City
August 3, 2018
Toronto-based Slate Office Real Estate Investment Trust is buying Canadian Imperial Bank of Commerce's U.S. headquarters in Chicago, its second building in the Midwest city as the founding partners of the real estate investment trust's largest shareholder seek property that's less expensive than in its home city in Canada.

The REIT said it agreed to buy 120 S. LaSalle St. and the adjacent parking garage in downtown Chicago for US$155.5 million, a price it said is significantly below replacement cost that's in the third-largest U.S. city.

"We are going to markets we believe have economic engines, and where we like the growth strategy," Brady Welch, one of the founding partners of Slate Asset Management, told CoStar News in a recent interview. Slate Asset owns about 9.3 percent of the REIT, according to recent securities filings.

Slate, which owns 44 offices buildings and 7.4 million square feet, has been focused on Canadian properties, but Blair Welch, Brady's younger brother and co-founder of Slate Asset, can see more moves south of the border.

"It comes down to what can I buy the exact same asset for in Chicago," said Blair Welch, in comparing the Midwest city to Toronto, where Slate Asset is headquartered. "Our opinion, it is a lot cheaper in the right location. We can effectively own one of the TD Towers at a fraction of the Toronto price."

He can envision Slate and its various entities looking at other U.S. cities because there are a lot more places to invest.

"It is a bigger market, and you have to be smart, but we believe downtown Chicago is a pretty good investment," said the younger Welch.

120 S. LaSalle is a 23-story, 710,557-square-foot building in the financial district of the city.

The property is 84 percent occupied with a weighted average lease term of 10.4 years. CIBC occupies 45 percent of the gross leasable area. The transaction is subject to closing conditions but is expected to be completed in the third quarter of 2018.

"120 South LaSalle is a landmark downtown Chicago address and is the U.S. headquarters of CIBC, a leading Canadian-based global financial institution and a key strategic financial partner of Slate Office REIT," said Scott Antoniak, chief executive of the REIT, in a statement.

Slate Office noted the property has cash flow opportunities from contractual rental increases, near-term leasing opportunities and rents it said are 21 percent below market.

Slate Office also announced it agreed to sell 139 Water Street and the Water Street Properties in St. John's, Newfoundland for $17.5 million. That sale price is being satisfied with $14.8 million in cash and a vendor-take-back loan of $2.7 million. The loan is at 8 percent and matures in August 2020. The deal is also subject to customary closing conditions and is expected to close next quarter.

Garry Marr, Toronto Market Reporter  CoStar Group   

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