W.P. Carey Offloads Suburban Chicago Office Assets

An entity created by W.P. Carey for liquidation purposes has offloaded a pair of suburban office assets via sale and deed-in-lieu of foreclosure, with one property reflecting the office market’s struggles, while the other offers a glimmer of hope.

Northwest of Chicago, New York-based Net Lease Office Properties sold the 104,600-square-foot office and industrial building at 2400 Huntington Boulevard, which serves as the U.S. headquarters of Japanese machine tool maker DMG Mori, for nearly $36 million, Crain’s reported. The price works out to roughly $344 per square foot. A venture of New York-based investment bank Mizuho Americas bought the property.

Separately, NLOP surrendered the 146,700-square-foot office building at 4300 Winfield Road in west suburban Warrenville, to its lender, Houston area-based American National Insurance.

W.P. Carey formed NLOP to manage and sell off a portfolio of 59 primarily net lease office properties, focusing on maximizing shareholder value through strategic asset management and property disposition.

With the recent deals, NLOP has divested two of its three Illinois properties. The company still owns an office building at 4101 Winfield Road in Warrenville, where the largest tenant is commercial printer R.R. Donnelley.

NLOP is working to pull away from a suburban office market grappling with record-high vacancies of more than 30 percent. That’s up from 22 percent when the pandemic started and ignited the remote-work era, crushing the office sector for years to come.

The sale of the Hoffman Estates property shows that there’s some investor interest in corporate buildings with reliable long-term tenants. Mizuho’s purchase price of $36 million surpasses the $31.5 million that W.P. Carey paid for the building shortly after its construction in 2009, marking a rare gain in value at a time when office properties are trading for far less than what they were once worth amid high interest rates and vacancies.

DMG Mori, which considered moving its headquarters to Chicago in 2018, has a long-term lease with annual base rent of nearly $2.5 million and 3 percent yearly increases, set to last almost 15 more years. DMG’s commitment provides a stable cash flow that likely attracted Mizuho to the investment.

Conversely, the Warrenville property has struggled to stay afloat with only short-term revenue prospects from its anchor tenant, Constellation Energy, whose lease expires in two years. The asset produces $2.9 million of annualized base rent, the outlet reported.

W.P. Carey bought the building for $34.8 million, $237 per square foot, in 2015 and took out a $22.6 million loan from American National Insurance. By relinquishing the property, NLOP likely deemed that it was worth less than the remaining loan balance of $20 million.

—Quinn Donoghue