Naperville Office Complex Sells for $18 Million
A California real estate investment firm bought a Naperville office complex for $18 million, 29 percent less than the property’s pre-recession price in 2007.
Irvine, Calif.-based Sperry Equities bought Washington Commons, an approximately 200,000-square-foot office complex on Diehl Road, according to DuPage County records.
The deal comes nine years after the complex sold for $25.2 million, before the recession hammered suburban values. In many cases values have never fully recovered.
Although the property’s value remains below pre-crash levels, Sperry believes it can cash in on the lowest suburban office vacancy in 14 years, allowing it to charge higher rents than those in deals signed in the past few years.
Suburban vacancy was 18.5 percent to end 2015 and 18.6 percent in the western part of the east-west corridor, according to Chicago-based Jones Lang LaSalle.
“They bought it in 2007 at the peak,” said Burton Young, a Sperry Equities principal. “Rents haven’t recovered to where they were in 2007, but we believe we can capitalize on market timing. There are some rents there that are low relative to the market, and there’s room to increase the occupancy. We think it’s a market-timing play.”
The seller was a Denver-based venture of real estate investment firm EverWest Real Estate Partners and real estate investment trust Dividend Capital Diversified Property Fund.
EverWest was known as Alliance Commercial Partners at the time of the deal. Alliance lost a few other suburban buildings to foreclosure during the downturn.
The Alliance venture that bought Washington Commons faced a potential loan default on the complex in 2011 because of rising vacancy, according to a Bloomberg loan report. But the owners later that year negotiated a maturity extension of four years, to February 2016, on the $21.3 million securitized loan, according to Bloomberg.
The Alliance venture also made a $4 million equity contribution and split the loans into A and B notes as part of the 2011 modification, according to the loan report.
EverWest, which changed its name in 2014, and Dividend Capital representatives did not return calls requesting comment.
Washington Commons, at 450-500, 550-700 and 750-900 E. Diehl Road, consists of 10 single-story buildings connected by foyers and hallways, on 21 acres, Young said. The complex was 77 percent leased when Sperry Equities struck the deal to buy it, and several small new leases have boosted occupancy to about 85 percent, he said.
The largest tenants are a regional headquarters of Toyota’s Lexus division, with 31,000 square feet, and a 17,000-square-foot Bright Horizons daycare, Young said.
Sperry Equities, once affiliated with brokerage Sperry Van Ness but now independently owned, plans upgrades including building out move-in-ready suites, he said.
“We love Naperville and the surrounding area,” Young said. “It’s a good long-term hold right off the I-88 tollway and Diehl Road.”
Sperry Equities owns about 6 million square feet of commercial real estate, including office and industrial space in Bolingbrook, Hoffman Estates and Tinley Park, Young said.
Source: Chicago Real Estate Daily Ryan Ori April 7th, 2016