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American Realty buys Google's Midwest HQ for $257m

The Glendale, California-based firm said its strategy to invest in income producing assets is the most effective approach at this point in the market cycle.

American Realty Advisors has purchased Google’s Midwest headquarters in an up-and-coming Chicago neighborhood for $257 million, the firm said Monday.

The Glendale, California-based private equity real estate firm bought 1K Fulton, a 10-story, mixed-use building at 1000 West Fulton Market that has been up for sale since early this year from local developer Sterling Bay Companies.

The building is 97 percent occupied, largely by Google, which takes up 358,000 square feet of the property’s 531,000 square feet, according to a statement from American. 1K Fulton has ground-floor retail tenants that include two restaurants.

“American has continued to position its portfolios defensively, investing in true core assets in major markets and highly dynamic submarkets across the country,” said Martha Shelley, American's senior portfolio manager, in Monday's statement. “We believe that this is the most effective approach at this point in the market cycle, and the 1K Fulton acquisition is reflective of our strategy. We were attracted to this asset because it has long-term leases with quality tenants, such as Google.”

Sterling Bay bought the former food warehouse for $12 million in November 2012 and converted the space into modern offices that opened late last year, according to real estate data provider Real Capital Analytics. The developer added amenities including a fitness center and rooftop decks.

The neighborhood, formerly one of Chicago’s meatpacking districts, is becoming a sought-after area for companies and retail catering to young professionals. Fast food giant McDonald’s is planning to move its suburban Chicago headquarters to another Sterling Bay development two blocks from 1K Fulton, and the area has seen a surge of local restaurants in recent years.

“1K Fulton represents the acquisition of a high quality cornerstone asset within one of Chicago’s most vibrant areas which is only in its formative period,” said Ray Kivett, American's managing director of investments. “Over the long run, we anticipate that this asset and its immediate Fulton Marketplace neighborhood will continue to grow its prominence in the overall fabric of the Chicago market. The recent news about McDonald’s corporate headquarters relocation to this area in order to attract high quality employee talent, coupled with the new boutique hotels under construction nearby, and the area’s thriving restaurant, retail, and nightlife business all support the thesis that this is an 18-hour location.”

American Realty Advisors has about $7.3 billion in assets under management, according to the company's statement.