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Aon Center selling for $712 million

Time:2016-06-01 From:Ryan Ori Author:admin Browse: Size:largemediumsmall


A New York-based company struck a deal to buy the 83-story Aon Center, the third-tallest building in Chicago, for $712 million, according to the seller, Piedmont Office Realty Office Trust.

The buyer is a venture of 601W Cos., led by New York real estate investor Mark Karasick. His firm is one of the owners of the two-tower Prudential Plaza next door.

The deal will close in the fourth quarter, according to Piedmont, a Johns Creek, Ga.-based real estate investment trust, which bought the iconic tower for $462.5 million in 2003.

The deal to sell the Aon Center comes a week after news broke that the newly merged Kraft Heinz had signed a 170,000-square-foot headquarters deal in the tower overlooking Millennium Park.

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“The successful sale of Aon Center will be the culmination of Piedmont's long-term strategy of transforming the asset into one of Chicago's most prestigious office towers,” Piedmont President and CEO Donald Miller said in a statement. “We have been fortunate to attract a number of distinguished tenants to Aon Center, such as KPMG, Microsoft, United Health Group, Integrys, the Federal Home Loan Bank of Chicago, and most recently Kraft Heinz. Additionally, we have also been successful in renewing existing quality tenants such as Aon, JLL, AT&T and Edelman.”

Karasick did not return a call requesting comment.

The 2.7 million-square-foot tower at 200 E. Randolph St. is selling for about $260 per square foot. The price is significantly higher than the $650 million range that people familiar with the property estimated it might fetch when Piedmont hired Jones Lang LaSalle Managing Director Bruce Miller and Senior Vice President Nooshin Felsenthal to sell it earlier this year.

In marketing the tower to potential buyers, JLL touted potential new sources of revenue, includingadding an observatory to the 1,136-foot-tall tower and converting some upper floors to residential condominiums.

Aon Center, a recognizable piece of the Chicago skyline, attracted bids from a large number of domestic and international investors, driving up the value, sources said. The tower's value also received a boost from the Kraft Heinz deal. The building is about 86 percent leased, according to Piedmont.

Karasick is making a big bet on the East Loop—the neighborhood's 16.5 percent office vacancy rate was the highest of all downtown submarkets during the second quarter, according to Los Angeles-based CBRE—while riding momentum from his building next door.

Karasick's 601W and Nanuet, N.Y.-based Berkley Properties struck a deal to take control of the two-tower, 2.2 million-square-foot Prudential Plaza in 2013, pouring in about $100 million of fresh capital. The previous owner, Los Angeles-based BentleyForbes Holdings, lacked money to sign new tenants after the property was hit hard during the recession.

Since taking control of Prudential Plaza, the venture has added amenities including a large roof deck overlooking the park, and has signed several new tenants.

Karasick is part of a loosely knit group of New York real estate entrepreneurs that have been buying buildings in Chicago in recent years. Berkley's Michael Silberberg, for instance, leads a venture that owns the Civic Opera Building. It is unclear if any of those other investors plan to invest in the Aon Center deal.

The 43-year-old Aon Center won't be the first well-known Chicago skyscraper to sell this year. In June, New York-based Blackstone Group—which sold the Aon Center to Piedmont 12 years ago—paid a Chicago-record $1.3 billion for the 110-story Willis Tower.