It seemed only a matter of time before skyrocketing property values in the Fulton Market District would result in the most expensive office building sale in the city’s history.
That title now belongs to a relatively nondescript seven-story office building on a site that was a surface parking lot just two years ago. In a deal that shattered the previous record paid per square foot for a Chicago office building, Chicago developer Shapack Partners sold a 70,000-square-foot office building it developed at 811 W. Fulton Market to Boston-based investor Intercontinental Real Estate for $50.3 million, the companies said in a statement.
The sale at $775 per rentable square foot topped the previous record of $734 per square foot, set just eight months ago, for a building larger than 40,000 square feet, according to research firm Real Capital Analytics. The prior record was for the RxBar headquarters building at 412 N. Wells St. in River North.
It’s the latest illustration of the eye-popping sums investors are paying for Fulton Market real estate as the corridor continues to transform from a domain of meatpackers and food wholesalers into a destination for corporate giants and upscale hotels, restaurants and retailers.
The trend of rapidly rising prices belies a downtown office sales market that has been mostly stagnant this year as many investors sit on the sidelines while uncertainty about the future of Cook County property assessments and taxes clouds the prospects for commercial buildings.
Fulton Market appears immune to that force. In another recent example, developer Sterling Bay is nearing a deal to sell its 1330 W. Fulton Market office building to a German investor for close to $175 million, or about $600 per square foot.
The sale price for 811 W. Fulton will make other Fulton Market developers salivate even more. Shapack and its investor in the record-setting building, the family office of Magnetar Capital founder Alec Litowitz, pulled out a huge gain on the property.
A Shapack venture paid $2.6 million for the site in 2014 when it was a parking lot at the southwest corner of Fulton Market and Halsted Street and took out a $20 million loan in 2017 to build 811 W. Fulton, according to Cook County property records. The developer modified that loan to $21 million in November, records show.
Despite breaking ground without any tenants signed—normally a risky play that’s tricky to finance—Shapack quickly leased up the building to publicly traded furniture company Knoll, Chicago trading firm BlackEdge Capital, women’s co-working firm Wing and community impact venture fund Chicago Beyond. The ground-floor retail space at the dark brick building, designed as a warehouse-style loft office to match the neighborhood’s historic look and feel, is leased to Wintrust Financial and tapas bar and restaurant Boqueria.
“My vision for Fulton Market was to maintain its authenticity, while creating one of Chicago’s most sought-after neighborhoods for brands coming from within Chicago and outside of Illinois,” Shapack Partners founder and CEO Jeff Shapack said in the statement. “It is rewarding to have the sale of 811 Fulton epitomize the success of an organically grown neighborhood in Chicago.”
Intercontinental Real Estate already was familiar with Fulton Market’s hot streak. It’s an investor in the 586-unit apartment building developer John Buck is set to open next year at 845 W. Madison St. and owns a Homewood Suites hotel a few blocks east of Fulton Market at 118 N. Jefferson St.
“The diversification of industries in the Fulton Market neighborhood has attracted a full spectrum of global, national and local companies, including Google and McDonald’s, and differentiates the area from any other submarket in the country,” Intercontinental Real Estate Senior Director of Acquisitions Steve Centrella said in the statement. “We are excited to continue our investment in the district.”
Fulton Market has been a gold mine for Shapack. The firm helped set off the neighborhood’s transformation in 2012 when it turned a former manufacturing building into a Soho House hotel and private club at 113-125 N. Green St., which it sold last year in a $95 million deal. Shapack also cashed out with big profits on a redeveloped former Fulton Market meatpacking facility that now houses co-working firm WeWork and the 29-story Parker Fulton Market luxury apartment tower.
Shapack’s Fulton Market portfolio includes 2.2 million square feet of projects it has developed or is planning, including the recently completed Hoxton Chicago hotel and a 750,000-square-foot office building at 167 N. Green St. anchored by a 140,000-square-foot WeWork location.
Bruce Miller of Jones Lang LaSalle represented Shapack in the 811 W. Fulton sale.
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