After buying a 25-story office tower in suburban Chicago at a massive discount to previous pricing and then filling large blocks of vacant space, a New York-based investor is ready to test the strength of the property sales market.
Sovereign Partners has hired JLL brokers to sell the Two Pierce Place tower in Itasca, Illinois, according to a JLL brochure.
The deal could be a test of a property sales market that has been sluggish in recent years because of weak demand from tenants, rising interest rates and other factors.
While many big office buildings in Chicago and its suburbs have fallen into financial distress and been handed back to lenders or sold at steep discounts to previous valuations, Two Pierce Place is a rare example of a property being offered for sale after a turnaround.
It’s unclear how much Sovereign Partners is expecting in a sale, and the firm did not immediately respond to a request for comment from CoStar News on Friday.
The firm is likely expecting a price far above the $24 million it paid for the tower and adjacent land in January 2022, when the building was more than 60% vacant.
That price was a small fraction of the $83.75 million that Piedmont Office Realty Trust paid for the tower within the Hamilton Lakes business park in 2006. That deal was a sale-leaseback with insurer Gallagher & Co., which in 2017 moved its headquarters from the tower to the nearby suburb of Rolling Meadows, and Hamilton Partners, which was the original developer of the tower and sold its ownership stake.
The insurance company’s exit from more than 300,000 square feet, followed by the onset of COVID-19 in early 2020, led to a massive loss of value.
Sovereign Partners, which specializes in high-vacancy turnarounds, completed a $29 million renovation of the tower in 2023, according to JLL. That included renovations to amenities, common corridors, restrooms and building infrastructure.
The refresh at the 33-year-old tower helped lead to more than 300,000 square feet of leasing over the past two years, according to the brochure. The property’s two largest tenants — Topco Associates, with 83,613 square feet, and AIT Worldwide Logistics, with 56,808 square feet, according to CoStar data — have signed during that time.
Two Pierce Plaza is now 72.4% leased, with a weighted average lease term of 8.3 years, according to the marketing materials.
A new owner could add to the property’s value by filling remaining spaces.
Although suburban Chicago landlords remain challenged, they benefit from a reduction of supply as many older buildings are converted into new uses or demolished for redevelopments.
That includes the former Allstate headquarters campus in Glenview being switched over to a logistics campus and the former Sears headquarters complex in Hoffman Estates making way for data centers.
In and around Hamilton Lakes, some older office buildings also are being replaced with data centers.
For the Record
JLL brokers Patrick Shields and Sam DiFrancesca are representing the seller.