Landmark transaction

Golub and Goldman Sachs are teaming up to acquire Chicago's landmark John Hancock Center for approximately $385m.

Chicago-based Golub and Company is teaming up with Goldman Sachs' Whitehall Street Real Estate Funds to acquire the John Hancock Center in Chicago for $385 million (€296 million). The seller was San Francisco-based private equity real estate firm Shorenstein.

The acquisition includes the building's 880,000 square feet of office space, 153,000 square feet of retail space, a 710-car parking garage, the building's observatory and its rooftop antennae. The building's 700 condominium units are not part of the transaction. Around 74 percent of the building's office space is currently leased.

“As partners with a shared goal for this unique property, we have the opportunity for creative marketing and repositioning at a time when North Michigan Avenue is experiencing a tremendous surge in its appeal to commercial tenants of all types,” Michael Newman, president and chief executive officer of Golub, said in a statement. “We will work closely with local brokers and tenants to ignite interest in the available office space.”

Shorenstein acquired the office and retail space in the building, which is on North Michigan Avenue, in 1998 for a reported $220 million.

Robert Underhill, a managing director at Shorenstein, says that the ancillary revenue from the parking deck, antennae leases, observatory attraction and retail floors are substantial.

“Those comprise a significant portion of the income from the property,” he told PERE. “They're really equally weighted across the segments.”

During Shorenstein's eight-year hold, the firm worked to lease up the building, reconstructed one of the rooftop antenna and compartmentalized all the various components in the building, allowing them to be freely sold by the building's owner. The firm also looked into the possibility of moving around tenants to develop a hotel property in the Hancock Center.

“We saw a hotel was feasible, but it would have taken several years to complete,” Underhill says, adding that the building is the last remaining investment in the firm's fourth fund, Shorenstein Realty Investors IV, which closed on $100 million in 1997. Rather than hold onto the property for a number of years, the firm decided to put it on the market.

“When you think about it, capital markets are pretty robust now,” he adds.