LaSalle buys Chicago office for $147m

The firm bought an office with a 57% occupancy rate blocks from its headquarters.

LaSalle Investment Management has purchased a Chicago office tower close to its headquarters for $146.5 million, according to people familiar with the transaction.

The investment manager bought 123 North Wacker Drive from loan provider LNR Property, which was acquired by Starwood Capital Group and Starwood Property Trust in 2013, according to data provider Real Capital Analytics (RCA). LaSalle purchased the 30-story, Class A building in Chicago’s West Loop with repositioning plans that include lobby and building systems renovations and the addition of rooftop terraces, according to a spokesman.

The building is 57 percent occupied, according to Thursday’s statement. Anchor tenant Morton Salt’s lease expires as early as 2019, and the building’s continuous blocks of office space could provide locations for companies looking to relocate to the area. In recent years, Chicago has seen large corporations, including McDonald’s and KraftHeinz, move from the suburbs into the city’s central business district.

The West Loop has also attracted tenants in the technology, advertising, media and information sectors. Once LaSalle completes the repositioning, asking rents could be one-third less than comparable rents at newly-built office towers, the firm’s spokesman said.

LaSalle bought the office tower with capital from its latest US value-add fund, LaSalle Income & Growth Fund VII, according to Thursday’s statement. The investment manager held a first close for the vehicle in January 2016 on $300 million, with 85 percent of the capital coming from institutional investors who made allocations to previous funds, PERE previously reported. LaSalle declined to comment on the fundraise, but the firm is targeting a March 31 close with a $750 million target, PERE understands. LaSalle has a 12.5 percent or above net internal rate of return target for the seventh fund.

“We are eager to embark upon a repositioning strategy of this well-known Chicago office building, given the substantial value that can be created for the fund’s investors,” Jim Hutchinson, president of LaSalle’s Income & Growth fund series, said in Thursday’s announcement. “Our deep knowledge of the Chicago market combined with our extensive direct operational and renovation experience gives us confidence that the transformation of this building will be executed in an efficient and accretive manner.”

LaSalle managed about $60 billion as of the third quarter, according to Thursday’s statement.