Former Phoenix Suns Owner Buys Discounted Chicago Office Icon

Former Phoenix Suns owner Robert Sarver’s foray into real estate has led to the acquisition of one of Chicago’s most recognizable structures.

His Arizona-based firm, 3Edgewood, purchased the 1.6 million-square-foot building at 600 West Chicago Avenue this month for just under $88.7 million, marking the city’s largest office property sale since 2018, CoStar reported. The acquisition follows the firm’s strategy of targeting properties in key U.S. markets, with prior purchases in Dallas, Houston and Los Angeles.

Eastdil Secured brokers Bryan Rosenberg and David Caprile represented the sellers in the transaction.

The building, constructed in 1908 as the Montgomery Ward Catalog House, was later redeveloped into an eight-story office complex.

The sale comes at a significant loss for its previous owners, Chicago developer Sterling Bay and J.P. Morgan Asset Management, who sold it for just $55 per square foot.

Sterling Bay, headed by CEO Andy Gloor, bought the property in 2018 for $510 million, or $319 per square foot. The purchase was financed with a $374 million senior mortgage and a $51 million mezzanine loan from Morgan Stanley.

Sarver sees significant potential, despite challenges including a vacancy rate of 37.5 percent.

The building houses tenants such as Echo Global Logistics, Tempus and Jump Trading. Some tenants, like Groupon, have downsized, but the company plans to invest in further enhancements, including tenant suites and outdoor terraces. Sterling Bay will remain as the leasing agency and property manager.

The deal continues a trend of office owners facing financial struggles in the wake of the pandemic.

The Vanbarton Group, for instance, recently sold its Midtown office building at 292 Madison Avenue for $90 million, after defaulting on an $87.5 million loan last year. The 26-story Art Deco building, located between East 40th and 41st Streets, was purchased by 60 Guilders and Sentry Realty, the real estate arm of American Exchange Group.

Another big haircut was Metropolitan Life Insurance’s sale of a 16-story office building in Chicago’s West Loop for just $18.5 million in cash. The building, which spans 372,400 square feet at 550 West Washington Boulevard sold to California investor Andrew Brog’s Brog Properties for $50 per square foot, a sharp decline from its 2013 sale price of $300 per square foot.

— Andrew Terrell