Hearn Plans Major Rehab After $375 Million Office Deal All News
Posted: September 2, 2014
Chicago-based Hearn said it closed the deal Aug. 28 with two investment partners, Chicago-based GEM Realty Capital Inc. and San Francisco-based Farallon Capital Management LLC. It did not disclose a price, which Crain'spreviously reported is $375 million.
That's about 9 percent more than the seller, a venture of Hong Kong-based Gaw Capital Partners and South Korean investors, paid in September 2011 for the more than 1.4 million-square-foot tower at 70 W. Madison St.
“It can certainly be a best-in-class, A product, and that's what we want to make it,” said Hearn President and CEO Stephen Hearn.
The new owners plan to invest $45 million to $50 million on aesthetic and infrastructure upgrades to the building and tenant improvements, Mr. Hearn said. The fitness center and lobby will be among the areas enhanced, and Hearn will build some “spec suites” — spaces already built out and furnished — while also replacing the elevator, roof and other areas in need of repair.
Three First National Plaza is more than 90 percent leased, according to real estate data provider CoStar Group Inc. Tenants include law firms K&L Gates LLP and Ungaretti & Harris LLP, private-equity firm Madison Dearborn Partners LLC and credit-card security software provider Trustwave Holdings Inc.
Senior Managing Director Stephen Livaditis and Director David Knapp, both in the Chicago office of New York-based Eastdil Secured LLC, brokered the sale for the Gaw venture.
Hearn, meanwhile, is in the process of selling the 40-story office tower at 55 W. Monroe St. The firm also is seeking city approval to add a glass structure in the plaza of the 100-story John Hancock Center — whose office space a Hearn venture bought for $140 million last year — where musicians would perform live as well as record music.
Hearn is scouting for more office deals in Chicago and other markets, Mr. Hearn said.
“We continue to love Chicago, but we also want to get back to being more of a national organization,” he said. “Chicago has become a major destination for investment dollars and it will continue to be so, and it's our hometown. We will continue to look at opportunities as they present themselves.”
By Ryan Ori