News Article

New Yorker seeks big return on Loop office sale


111news

111 W. JACKSON BLVD

Just after adding one of Chicago's biggest office properties to his portfolio, New York investor Michael Silberberg is selling a smaller one that has more than tripled its occupancy in two years.

A venture led by Mr. Silberberg, of Nanuet, N.Y.-based Berkley Properties LLC, hired the Chicago office of HFF Inc. to find a buyer for the 24-story tower at 111 W. Jackson Blvd.

Mr. Silberberg said he expects it to sell for about $135 million, more than $240 per square foot, lofty territory for a 52-year-old Class B building. But the Loop tower is 95 percent leased, and Mr. Silberberg estimates the owners have spent about $45 million on improvements, including a fitness center, roof deck and conference center.

The venture bought 111 W. Jackson for $35 million in 2011. A $135 million sale would represent a gain of about $55 million on the investors' estimated $52 million of equity in the deal.
The venture has picked a good time to sell, with investors bidding up prices this year on downtown office buildings.

The listing follows a deal finalized last week in which Mr. Silberberg and fellow New York real estate investor Mark Karasick will invest more than $100 million for a controlling interest in Prudential Plaza, the 2.2-million-square-foot office complex that ran into financial trouble amid the defection of key tenants.

The tower on Jackson is the first one in Chicago put back on the market by Mr. Silberberg, part of a loosely affiliated group of New York investors who often team up on deals. Since 2010, he also has invested in the Civic Opera Building and office towers at 180 N. LaSalle St. and 231 S. LaSalle St.

Mr. Silberberg scooped up the 558,388-square-foot tower on Jackson for about $63 per square foot in 2011, saving its previous owners from foreclosure.

AGGRESSIVE REPOSITIONING

Occupancy was 29 percent when the Silberberg venture acquired the tower, before starting an aggressive repositioning that included building out and furnishing floors on speculation.

The strategy paid off with a series of leases including a 74,000-square-foot deal with debt collector Harris & Harris Ltd. and a 40,000-square-foot lease with investment bank Loop Capital Markets LLC.

“We normally would have looked at a longer horizon,” Mr. Silberberg said. “This one just really exceeded our expectations in the timing. Things happened a lot quicker than expected.”

The average remaining term on leases in the building is 7.5 years, according to an information packet distributed by HFF.

Ownership paid about $7 million in cash in 2011, borrowing the other $28 million. In December 2012, the owners replaced that debt with a 10-year, $80 million commercial mortgage-backed securities (CMBS) loan, according to Cook County records and a Bloomberg L.P. loan report.

The building was valued at $111.7 million last October, when it was 86 percent occupied, according to the Bloomberg report.


<< Back to news Next Article >>