A Dallas-based owner of medical real estate has a contract to buy a life science lab building on the North Side of Chicago from the developer of the stalled Lincoln Yards megadevelopment nearby, with plans to convert the five-story structure into a medical outpatient facility.
Altera Fund Advisors expects to complete the purchase of the Lincoln Park Bioscience Center at 2430 N. Halsted St. later this year, Altera CEO Terry Quinn told CoStar News.
The pending deal comes just over a year after CBRE brokers began marketing the building for sale on behalf of its Chicago-based owners — Lincoln Yards developer Sterling Bay and its partner on the project, Harrison Street — and their lender, Capital One.
Quinn declined to confirm the purchase price, which people familiar with the property say is likely to be well below the value of a loan on the property of more than $64 million.
If the sale is completed as expected, it will be the latest setback related to Sterling Bay’s stalled $6 billion megadevelopment about a mile away, called Lincoln Yards.
Altera said it plans to convert the property to medical offices, likely to multiple tenants offering outpatient care, Quinn said.
It will be just the second acquisition in the area by the Texas firm, following a property in suburban Oak Lawn, Illinois, that it acquired as part of a larger portfolio.
“We are ecstatic about the pending purchase of Lincoln Park Bioscience Center in the heart of Lincoln Park,” Quinn said in a statement. “Our plans will focus on leasing the balance of the space to medical users for clinical space in a Class A [medical office building] environment.”
High-powered heating, cooling and electrical systems are ideal for outpatient tenants, he said.
“The MOB market in Lincoln Park is over 96% leased, and we can deliver the largest blocks of space in the submarket ranging from 2,000 to about 50,000 [square feet] of contiguous space.”
Altera’s strategy is to buy medical office buildings and other healthcare-related real estate “at a substantial discount to replacement cost,” according to the company’s website.
Life science partnership
Sterling Bay bought the property from the Ann & Robert Lurie Children’s Hospital for $24 million in October 2018, which had left the neighborhood a few years earlier for a new downtown campus in Streeterville.
Sterling Bay later formed a partnership with Harrison Street, with plans to use the Halsted Street building as an incubator for life science research companies that would grow large enough to need new larger new space within buildings they planned to develop at Lincoln Yards.
But a slowdown in national demand for life science space after the onset of COVID-19 and competition from facilities in other areas of Chicago stalled those plans, leaving the lone completed building in Lincoln Yards — an eight-story building at 1229 W. Concord Place — still vacant today.
In redeveloping the Halsted property into the Lincoln Park Bioscience Center, Sterling Bay and Harrison Street invested more than $19 million in renovations and build-out costs for tenants, according to CBRE materials.
In 2021, the developers sold adjacent land for $3.7 million. That buyer built a 36-unit apartment building on the site.
The developers refinanced the property with a $64.25 million loan from Capital One in September 2022, according to Cook County property records. That replaced a loan of about half that amount from a separate lender.
At the time it went on the market for sale, the property at 2430 N. Halsted was 41% leased to two tenants with a weighted average lease term of 5.6 years, the CBRE brochure said.
Sterling Bay declined to comment on the pending sale. Harrison Street and Capital One did not respond to requests for comment.
New development planned
Lender Bank OZK seized the northern 28 acres of the Lincoln Yards land from Sterling Bay earlier this year. Last month, the bank sold it to JDL Development and Kayne Anderson Real Estate for nearly $84 million. Those firms plan a development with nearly 3,300 apartments, condominiums, townhouses and single-family homes, which they are branding as Foundry Park.
On the southern portion of the site that Sterling Bay also is at risk of losing, brokers from Eastdil Secured and Savills in August began marketing the lone completed building for sale on behalf of Bank OZK, which also was the lender on that property.
At the time of the land sale, Bank OZK also said in a Securities and Exchange Commission filing that it plans to take title to the Concord Place building if efforts to sell or lease the property “do not result in an acceptable transaction soon.”
For the record
O’Donnell Commercial Real Estate brokers Kevin O’Donnell and Meredith Klug will oversee leasing for the new owner.