Real estate developer Hines is in talks to buy the former headquarters of aerospace giant Boeing after another buyer's deal for the 36-story office tower along the Chicago River fell apart.
More than three years after Boeing moved its corporate headquarters from the city and months after another developer signed an ill-fated contract to buy the tower at 100 N. Riverside Plaza, Hines is negotiating to purchase the high-profile property from the Arlington, Virginia-based plane maker, according to people familiar with the situation.
Boeing moved its corporate headquarters from the tower to the current site near Washington, D.C., in 2022, while keeping some employees in the Chicago building.
The deal with Hines is preliminary and still could fall apart at a time of historically low office demand, high borrowing costs and other challenges.
Further complicating the 100 N. Riverside deal is that Boeing is selling only the leasehold interest in the building, with the land beneath it owned separately.
That may have been a significant hurdle in an unsuccessful attempt by Sterling Bay to buy the property. The Chicago-based firm reached an agreement to buy it in July, but that deal has since fallen apart, according to people familiar with the situation.
“We made the decision to terminate the agreement,” a Sterling Bay spokesperson said in a statement. “Unfortunately, our due diligence did not support advancing a transaction in the current market conditions.”
Possible strategies
Real estate professionals say possible strategies for Hines to use to overcome any obstacles posed by the ground lease could include teaming up with its New York-based landowner, the Stahl Organization, on the purchase or by striking a buyout deal to consolidate ownership of the building and the land.
It’s unclear how much Hines has offered to pay for 100 N. Riverside. Sterling Bay had been expected to pay $25 million to $30 million, according to Crain’s Chicago Business, which first reported that deal in July.
Hines is a longtime developer of office and residential towers along the river, including the recently completed 60-story Salesforce Tower not far from the Boeing building.
Hines declined to comment on the deal. Boeing and Stahl did not respond to requests for comment from CoStar News.
Ground-lease payments cut into profits and often make financing leasehold acquisitions difficult, at a time when securing debt and equity for office deals already is a challenge.
Without unwinding the separate land ownership, Hines would need to generate enough rental revenue to offset a ground lease with escalations over time, according to people familiar with the property.
Boeing’s ground lease is owned by Stahl on a 99-year agreement that runs until 2084. In 2021, Stahl refinanced its ownership of the ground with a $40 million loan that matures in 2031, according to Cook County property records.
The largest tenant in the building, Here Technologies, occupies nearly 118,000 square feet, according to CoStar data.
Boeing first leased, then bought the tower
Boeing initially signed a 15-year lease in the building in 2001 after striking a deal to move its headquarters to Chicago from Seattle. Boeing bought the building for $165.2 million in 2005.
It’s unclear how many employees Boeing now has in the Chicago tower or how much space its workers now occupy. The company said it had 400 Chicago workers at the time of the headquarters move in 2022, with plans to maintain a large presence in the city.
Last month, in one sign of a pending building sale, the airplane maker and the Boeing real estate entity that owns the tower signed a memorandum of lease for the 27th through 29th floors, according to Cook County property records.
Those floors total about 70,000 square feet, according to CoStar data.
Boeing’s office lease runs from September 2026 to August 2032, according to the document, with options to extend the lease term for as many as 10 additional years on half or all the space.
The memorandum provides Boeing with rights to portions of the building, including some of the parking garage and the rooftop, as well as expansion options, according to the memorandum. Boeing also keeps a say in building signs and naming rights, while placing restrictions on leasing space in the tower to competing businesses or a “foreign government entity,” the memorandum states.
It’s unclear whether the sign rights mean that Boeing’s illuminated name and logos near the top of the tower will remain for the long term.
Although the tower is more than three decades old, real estate professionals say a buyer willing to make extensive renovations could capitalize on a dearth of trophy office space available along the river to land large new tenants.
For the record
Boeing is represented by Cushman & Wakefield brokers Cody Hundertmark, Tom Sitz and Jeff Cole.