Developer Sells Warehouses for $105 Million
Wednesday, February 17th 2016
CHICAGO, IL – A developer sold six Chicago-area warehouses for almost $105 million, cashing in on record levels of investment in local industrial properties.
Panattoni Development sold five buildings in the Turnberry Lakes Business Park in Roselle for $83.5 million and sold a Skokie warehouse for $21 million, according to brokerage Colliers International and real estate data provider CoStar Group.
Both December deals were part of just over $4 billion in Chicago-area industrial sales in 2015, topping the record $3.4 billion from 2006 in the buildup to the last recession, according to New York-based research firm Real Capital Analytics.
The Chicago area ranked second among U.S. markets in 2015 sales, trailing only Los Angeles’ $5.7 billion. Chicago-area sales volume rose from $2.6 billion in 2014.
“Interest in the Chicago area is at an all-time high from an investor perspective,” said Jason Rosenberg, a senior development manager at Panattoni. “In retrospect, market fundamentals appear to be much stronger now than they were in the last run-up.”
Overall vacancy in the Chicago area reached a 14-year low in 2015, according to Colliers.
Panattoni’s sales were part of $77 billion in U.S. industrial deals in 2015, up 54 percent from the previous year and well ahead of the previous record, $59.6 billion sold in 2007, according to Real Capital.
Local Colliers principals Jeff Devine and Steve Disse represented Panattoni in the sales.
The buyer in the five-building Turnberry Lakes deal was an affiliate of Deutsche Asset & Wealth Management, the German bank’s investment advisory unit. That deal contributed to a record $27.4 billion in U.S. industrial acquisitions by foreign investors in 2015, according to Real Capital.
A Deutsche Bank spokeswoman declined to comment.
The cap rate, or first-year rate of return, was 4.85 percent, believed to be a Chicago-area record, Rosenberg said. Cap rates fall as property values rise.
That result was difficult to imagine when construction of the five buildings, totaling 713,523 square feet, at Turnberry Lakes was halted during the recession, with one building completed and another halfway built. Work was stopped for part of 2009, and resumed in 2010, Rosenberg said
BUILT ON SPEC
Sacramento, Calif.-based Panattoni and Chicago-based partner LaSalle Investment Management built the warehouses on Gary Avenue in west suburban Roselle on speculation, or without tenants signed in advance.
They are now fully leased to 12 tenants. The largest tenant, Affordable Office Interiors, leased all 154,126 square feet of a warehouse at 501 Gary Ave. just as Panattoni was set to begin construction. The rest of the buildings were leased up during or after construction, Rosenberg said.
The last of the five planned buildings was completed in December.
Also in December, Panattoni finished leasing the 150,105-square-foot building at 7711 Gross Point Road in north suburban Skokie.
Panattoni bought a one-story office building on the site in 2013 and demolished it, replacing it with the warehouse it completed in December 2014, Rosenberg said. It is leased to three tenants.
That building is the first area investment by Ron Kaufman, whose namesake owner did not return a call requesting comment.
Rosenberg declined to say how much Panattoni invested developing the Skokie or Roselle sites.
Panattoni plans to begin construction of about 2.3 million square feet of warehouse space this year in Romeoville and Franklin Park.