Jack Kim scored a crucial lease extension with Invesco for his firm KORE Investments’ suburban Chicago office complex, in a deal that bucks the trend of commercial tenants cutting back on real estate.
Atlanta-based Invesco reupped for 70,000 square feet at 3500 Lacey Road in west suburban Downers Grove, a 13-story building spanning 620,000 square feet, according to JLL, which represented the landlord, Kim’s Denver-based firm, in lease negotiations. Toronto-based BentallGreenOak also owns a stake in the ownership of the property.
The deal locks Invesco into a “long-term” extension ahead of its scheduled lease expiration in April, according to public loan data.
While Invesco isn’t taking any more or less space than it had previously rented from the Kore-Bentall venture, the deal is welcome news for suburban office landlords looking to stop financial bleeding after the pandemic slashed demand for workspace across the Chicago area and the nation. Suburban Chicago’s overall office vacancy rate of more than 30 percent is an all-time record, driven by tenants such as 3500 Lacey’s largest, Health Care Service Corp., trimming their commercial real estate footprints.
The health care firm, the parent of Illinois’ largest insurer Blue Cross Blue Shield, provided what looked like a window for the KORE-Bentall venture to cash out in 2022, when the tenant moved its suburban Chicago office into 133,000 square feet at 3500 Lacey. The move was crucial for the landlord after the building lost its previous largest tenant, McDonald’s supplier Havi Global Solutions, in a relocation to downtown Chicago. But it marked a 25 percent decrease in lease size for HCSC, as it moved out of 1020 31st Street in Downers Grove.
Soon after inking the lease with HCSC, the KORE-Bentall venture hired Cushman & Wakefield’s Chicago office to sell the property, which was expected to fetch between $160 million and $170 million, market insiders said at the time. That would have notched a win for KORE, which bought the property at a $128 million valuation in 2019. Bentall led the venture of the previous ownership and maintained a stake in the property when KORE entered the picture. Bentall was also more in favor of selling the property in 2022, while KORE wanted to hold on.
Ultimately, the building never sold, and it was pulled from the market in mid-2022, as the landlord group determined the interest rate hikes that began that year disturbed the market with too much uncertainty to move forward with a deal, according to a person familiar with the property.
JLL’s Chris Cummins, Dan Svachula and Allyson Birchmeier represented KORE in the Invesco transaction.
Invesco didn’t immediately return a request for comment Thursday. The exact length of its lease and rental rate could not be determined.
Invesco maintained its rank as the third-largest tenant at 3500 Lacey, with larger deals for HCSC and sports nutrition company Glanbia’s 95,000-square-foot lease. The building was 89 percent leased as of March and brought in $15 million in revenue over the previous 12 months, for a total net cash flow of $6.6 million, after its expenses and debt service costs, loan data shows.
The property is encumbered by a nearly $86 million CMBS loan that matures in 2029.