Chicago investor flips Evanston building for $32 million
Another deal shows it’s a good time to be an office landlord in the lakefront suburb. It’s a good time to be an office landlord in Evanston. Capitalizing on one of the tightest office submarkets in the area, a venture of Chicago-based Steelbridge Capital last week sold the 10-story building at 500 Davis St. […]
Another deal shows it’s a good time to be an office landlord in the lakefront suburb.
Capitalizing on one of the tightest office submarkets in the area, a venture of Chicago-based Steelbridge Capital last week sold the 10-story building at 500 Davis St. to a joint venture of Northbrook-based investor Randy Rissman and CBRE Chairman Bob Wislow for $32.4 million, according to Cook County property records and sources familiar with the deal.
The price dwarfs the $18 million that Steelbridge paid for the property in the lakefront suburb just 2½ years ago, underscoring the strength of a location with lots of tenant demand and few office options. Steelbridge joins a cluster of landlords in Evanston that have cashed out with hefty profits over the past couple of years as buyers have chased properties in town centers that have ample access to transit.
Its leasing team quickly proved them right, bringing the building to 96 percent leased from the previous 85 percent. Now its most attractive spaces are renting in the mid-$40 range per square foot, Campbell’s statement said.
“What was also interesting was that as we moved up our rates, so did the best buildings in Evanston, and now they are asking close to $50 (per square foot) for the best spaces,” the statement said. “That fact has enabled us to keep pushing up our rates.”
Steelbridge also opened up the building’s parking garage to transient use and bolstered its annual parking revenue by nearly 50 percent over a two-year span to more than $350,000 in 2018, according to a projection in a marketing flyer for the property.
That increase, combined with the rental rate hikes, helped boost the building’s annual net operating income by 78 percent year-over-year in 2017 to $1.6 million, according to the flyer.
It’s a big change from a decade ago, when a previous owner defaulted on a $21 million loan on the property and eventually lost it through foreclosure to Needham, Mass.-based CWCapital Asset Management. CWCapital, which represented investors who bought securities backed by commercial mortgages including the Davis Street building loan, eventually sold the property for $14.9 million in 2014 to a venture of California real estate investor Sabal Financial Group.
The property’s newest owners are buying into an Evanston office market boasting just 6.2 percent vacancy at the end of 2018, according to brokerage CBRE. That’s well below the 18.8 percent average for the Chicago suburbs and 13.4 percent average downtown, CBRE data show.
That staggering metric is one reason another Evanston office building, Orrington Plaza, notched a similar big return for its former owners. The building traded in June in a deal that valued it at $91 million—towering over the $61.5 million it sold for in 2013.
Rissman is best known as a co-founder of Tiger Electronics, the company behind electronic toy fads like Furby, Giga Pets and handheld LCD games. But he’s also been an active real estate investor, paying almost $43 million last year for the WeWork property in the Fulton Market District.
He has teamed up before with Wislow, who was CEO of Chicago boutique brokerage U.S. Equities Realty until it was acquired by CBRE in 2014. A Rissman-U.S. Equities venture has owned the office building at 600 W. Fulton St. since 2006.