Red River’s Evanston Discount Looks Like Loss For Franklin Street

A rare sale of an Evanston office with a strong tenant roster looks to have led to a big loss for a Massachusetts-based investor, offering another sign of the difficulty office investors face as the lingering effects of the pandemic meet rising interest rates.

George Carter’s firm Franklin Street Properties, based in Wakefield, Massachusetts sold the approximately 195,000-square-foot property at 909 Davis Street to a New Jersey-based firm for $27.8 million, or about $142 per square foot.

Franklin bought the six-story asset in downtown Evanston for $35.1 million in 2011, or $180 per square foot, according to published reports. Before that, it moved for $34 million in 2003.

The property’s buyer is Lakewood-based Red River Asset Management. The firm did not return a request for comment.

Franklin Street put the property on the market and was reportedly seeking between $40 million and $45 million in March, when it hired Newmark to list it. Franklin’s Will Friend declined to comment on the deal, and Newmark brokers Jim Postweiler and Peter Harwood didn’t return requests for comment.

It’s far from the only suburban Chicago office building that has failed to fetch a seller’s ideal price in recent deals.

The 280,000-square-foot Three Overlook Point in the Lake County town of Lincolnshire–a a property that’s fully leased by Zebra Technologies through 2032–was valued at nearly $44 million, or $157 per square foot, in last month’s nationwide portfolio sale of six suburban buildings that Griffin Realty Trust unloaded to Workspace Property Trust, Lake County records show. That was down from the $60 million, or $214 per square foot, that the building reportedly fetched from Griffin in 2016.

Other recent suburban office deals include two fully vacant buildings that sold for fractions of the investments real estate firms poured into them. Arizona-based Orion Office shedded the 197,300-square-foot building at 2211 Sanders Road in Northbrook for $2.5 million, or less than $13 per square foot, down from the $44 million it acquired the property for in 2011. And LXP Industrial Trust and Davidson Kempner Capital Management sold a vacant 342,000-square-foot Schaumburg office building at 231 North Martingale Road for $7.4 million, or $25 per square foot, after pouring $30 million into renovating the property.

The Evanston property was 93 percent leased when it was listed, according to Newmark. Its tenants include NorthShore Medical Group, coworking firm Industrious, Athletico Physical Therapy, biopharmaceutical company Aptinyx, Houghton Mifflin Harcourt, Merrick Pet Care and Medpoint Digital, Newmark said at the time.

The deal is the first major sale of an office building in three years in Evanston, which is home to Northwestern University. The listing represented a test for the office market at a time when companies embrace hybrid work schedules and remote work remains popular. Suburban office vacancy rose to more than 25 percent in the third quarter last year, according to the most recent report available from Newmark.

While investors have been bullish on Evanston offices in the past, the market’s pace slowed during the pandemic. An office building at 1007 Church Street, which sits kitty-corner to the Davis Street property, that was put on the market in 2021 never sold.