A New York investment firm is entering the Chicago market with its purchase of a Class A building in Chicago’s West Loop, betting that demand for modern buildings with lots of amenities will remain high in the pandemic-crippled office market.
Nightingale Properties bought a 29-story, 480,000-square-foot office building at 200 West Jackson Boulevard across from the Willis Tower, the company said. Nightingale paid $130 million to the sellers, a joint venture of Chicago real estate developer White Oak Realty Partners and alternative investment firm Angelo Gordon, according to people familiar with the deal.
Nightingale financed the purchase through a $25 million equity raised from online real estate investing platform CrowdStreet, a $86 million CMBS debt from Citibank and a $17 million mezzanine loan from Kawa Capital Management.
Close to CTA’s Quincy station and two blocks from Metra’s Union Station, the building has all the attributes that Nightingale was seeking for a boutique office property, said Will Hutton, director of acquisitions and capital markets at Nightingale.
“We are firm believers in the future of office, and 200 West Jackson echoes our data-driven investment thesis for transit-oriented central business district office investments driven by a flight to quality by tenants in a post-COVID environment,” Hutton said.
Chicago’s office market is still struggling from the pandemic and the widespread adoption of working from home, with occupancy rates lower than pre-pandemic levels. Vacancy rates stood at 19.7 percent in the last three months of last year, still second-highest on record, lagging behind the third quarter, according to CBRE.
While Chicago’s office market remains distressed, Class A buildings with amenities are finding tenants in prime locations including Fulton Market, which is emerging as a bright spot. About 36 percent of the top transactions occurred in the West Loop in the fourth quarter in 2021, according to Savills.
Amenities include a barista bar, conference rooms, fitness center and locker rooms at the building that is 83 percent leased, anchored by market research company Nielsen. Nielsen’s lease for 44 percent of the building runs through 2034, according to a flyer from Cushman & Wakefield which marketed the property for sale.
With the transaction, White Oak Realty Partners and Angelo Gordon are cashing out from the building they had attempted to before the pandemic. New York Life Real Estate Investors reached an agreement for around $150 million in early 2019, but the deal fell through.