Suburban Chicago Office Portfolio for Sale

Thursday, April 13, 2017

Update:  HFF announced the closing of this sale on November 1, 2017. For a current list of available commercial real estate properties for sale, please click here.

Holliday Fenoglio Fowler, L.P., (HFF) is exclusively marketing for sale Tri-State International Office Center, a fully amenitized, five-building office portfolio totaling 559,204 rentable square feet and located in the Chicago-area community of Lincolnshire, Illinois. The portfolio features a balanced tenant roster with 7.8 years of remaining lease term and benefits from fantastic visibility and access from the adjacent Tri-State Tollway. Further, the commercial property for sale is proximate to the affluent North Shore communities, which are home to the Chicago area’s executives and decision makers.

The 79.3-percent-leased portfolio derives income stability from its anchor tenant, CDW, a Fortune 500 Company that recently relocated their headquarters to the property and fully occupies two buildings. Constructed between 1984 and 1989, Tri-State International Office Center comprises the CDW Center (the 25 and 75 Buildings) and the 100, 200 and 300 Buildings, which are all situated on 37.4 acres at the four-way interchange of the Tri-State Tollway (Interstate 94) and Half Day Road (Route 22), complemented by beautiful landscaping. The CDW Center, which totals 209,021 rentable square feet, or 37.4 percent of the portfolio, is fully leased until November 2028. The remaining 100, 200 and 300 Buildings, which total 350,183 rentable square feet, or 62.6 percent of the portfolio, currently have 115,652 rentable square feet of vacancy, which equals 20.7 percent of the portfolio. This offers a significant value-add component. 

Tri-State International Office Center is newly upgraded with a conference center, 135-seat auditorium and amenity center in the 200 Building, and a fitness center and deli (currently undergoing renovations) in the 300 Building. A recently completed four-story parking structure was constructed for CDW’s employees and is immediately northeast of CDW Center, which contributes to the property’s above average 4.3 / 1,000 rentable square feet parking ratio.

Inclusive of the parking deck construction, current ownership has invested more than $15.1 million since 2013 to upgrade the amenities and to implement other substantial improvements to the building systems, parking lot, building lobbies and multi-tenant corridors and restrooms. Due to this recent capital infusion, a future investor is able to immediately capture new tenants seeking accessibility, visibility and Class A amenities, all while providing an economical alternative to competing buildings on Route 60 (Townline Road) or Lake Cook Road.

Suburban Office Portfolio for Sale Investment Highlights

  • Stable Cash Flow with Value-Add Upside:  The combination of the five assets presents a unique opportunity to acquire the long-term stable cash flow provided by CDW at CDW Center and further enhance returns through the stabilization of the 100, 200 and 300 Buildings. The 100, 200 and 300 Buildings sit southwest of CDW Center and are connected by ground-level enclosed walkways. These buildings represent a value-add opportunity through the lease up of 115,652 rentable square feet, which will enhance immediate cash flow and drive residual value.
  • North Shore Location with Superior Accessibility:  The North Shore is recognized for some of the Chicago area’s most affluent and well-educated communities, where many executives and decision-makers are just a few miles away. Within a one mile radius of Tri-State International Office Center over 75.8 percent of the population possesses a bachelor’s degree or higher level of education, and the average household income is $236,722. With many executives and professionals calling the area home, the immediate area boasts a median housing value of $661,750, which demonstrates the desirability of the region. Tri-State International Office Center is well-positioned to tap the diverse and skilled labor pool clustered in the Greater North Shore area.
  • Highly Attractive and Economic Alternatives:  Current asking rates at Tri-State International Office Center offer a significant discount to Class A alternatives in the area, while still providing physical characteristics and amenities consistent with these higher cost buildings. Tri-State International sits on Half Day Road (Route 22), which is halfway between Lake Cook Road in Deerfield, and Townline Road (Route 60) in Lake Forest, when traveling along the Tri-State Tollway. However, the Class A net asking rents for office buildings along these two corridors range from $16.50 to $22 per rentable square foot, compared to Tri-State International Office Center’s net asking rates of $13.50 per rentable square foot. This is a 29 percent discount to the average rental rate across these properties, which totals approximately 2.1 million square feet. As this market-leading competitive set of assets continues to tighten and asking rents continue to rise, a number of value-focused office tenants will consider fully amenitized alternatives, such as Tri-State International Office Center.
  • Chicago’s Premier Office Submarket:  The North Suburban submarket’s strong demographics and high-end housing stock provide an exceptional labor pool that keeps vacancy rates consistently below the suburban average and makes it the premier option for Chicago-area companies. Of the 23 Fortune 500 companies headquartered in suburban Chicago, 15 are located in the North Suburban submarket, including CDW, which is headquartered at the property. Many of the Chicago area’s largest employers are concentrated in the North Suburban submarket including Abbott Laboratories, Allstate, Anixter, Aon Hewitt, Astellas, CVS Caremark, Hospira, Illinois Tool Works, Takeda and Walgreens.

Investors are welcome to bid on the portfolio or CDW Center separate from the 100, 200 and 300 buildings. For more information on this office portfolio for sale or other investment sale listings near Chicago, please contact Bryan Rosenberg, Patrick Shields, Mark Katz, Jeffrey Bramson or Jaime Fink in HFF’s Chicago office. For a listing of national commercial real estate listings, please click here.

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