Fulcrum Pays $10M for Waukegan Office Building

Fulcrum Asset Advisors expanded its considerable share of midsize suburban office holdings with a sale-leaseback deal in Lake County.

The Chicago-based private real estate investment firm paid $10.3 million for the three-story, 130,000-square-foot Class B office building at 2100 Norman Drive in Waukegan. Built in 1989, the property serves as the headquarters for material handling equipment supplier UCC Environmental. The building’s seller is an LLC managed by Don and Douglas Basler, former heads of UCC.

Fulcrum’s Chicago-area office portfolio totals more than 6 million square feet and is mostly made up of Class B properties in the suburbs, according to the firm’s website. It also owns similar assets in the St. Louis and Milwaukee areas. The firm’s principals are former Ridge Realty Group partner Tom Cox, former Capital Automotive REIT COO Scott Stahr and former RREEF Property Trust executive Peter Broccolo.

Terms of the lease Fulcrum struck with UCC as part of the deal are unclear from public records. Fulcrum did not respond to requests for comment.

The buyer’s addition to its office portfolio comes at a tough time for Chicago’s suburban office market, including one of Fulcrum’s own assets, as investors shift into other sectors of commercial real estate. Tenants of Class B offices collectively shed over 584,000 square feet more than they leased in the Chicago suburbs in the first quarter, according to Cushman & Wakefield.

Suburban offices hit a record-high vacancy rate of 28 percent at the end of 2022, according to the latest report from JLL, though investors have had some luck with well-located properties that are close to fully leased. Another Lake County office building, the Class A Bannockburn Corporate Center, recorded only a slight dip in value since 2016 with its sale for $28.6 million this month, despite being nearly fully occupied.

Lake County is also home to one of Chicagoland’s largest office-to-industrial projects in the works, with Bridge Industrial vying to buy the 101-acre former Baxter International headquarters in Deerfield and tear down corporate buildings to reposition the land as a logistics campus. Brennan Investment Group is also exploring a similar project that could cost $100 million and result in a teardown of a Rolling Meadows office building that the development firm purchased out of foreclosure, it announced last week.

Such projects are a reflection of commercial real estate demand drying up for offices and expanding for industrial assets.

Plus, the 691,000-square-foot Central Park of Lisle in DuPage County — in which Fulcrum has owned a stake since 2010, according to the firm’s website — has faced loan woes in recent months. The property had its appraised value slashed to $68.3 million in March as its occupancy fell below 80 percent, according to a new evaluation. The property’s loan has been in special servicing since September and matured in January without being paid off, according to bond ratings agency DBRS Morningstar.