Commercial Investment Real Estate March/April 2018 | Page 42

REGIONAL
OUTLOOK
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Originally designed by renowned architect Louis Sullivan in 1899,
the Sullivan Center offices will be sold for $175 million by New
York-headquartered firms KKR and Madison Capital to New York-
based investor 601W Cos. The 15-story building in the Chicago
Loop does not include the ground-floor retail space, which is owned
separately. KKR and Madison Capital will make a 17-percent return
on investment on their $267 million purchase of the entire building
in April 2016. The two companies already sold the retail portion
of the Sullivan Center for nearly $147 million in August 2016 to
Acadia Realty Trust, a Rye, N.Y.-based real estate investment trust.
Currently, the 833,000 sf of office space is almost fully leased.
Chicago’s Big Deal
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CMBS Delinquency Rates for
Office Soar in Washington, D.C.
Examining comparable MSAs nationwide, the Washington-Arlington-
Alexandria MSA shows a significant uptick in delinquency rates for
office from 4 percent to 10.8 percent during a 21-month period.
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State
No. of
Delinquent Loans
Total Issuance
Trust Balances
CMBS 1.0
DC 5 16.14%
MD 26 16.96%
VA 31 64.68%
Due to improving market conditions, out-of-state buyers
have flocked to Cleveland, including Hertz, Shelbourne, and
Somera Road. These investors are seeking higher yields than
available on the coasts, relatively low barriers to entry, and
positive underlying fundamentals. Total 62 97.78%
DC 1 1.46%
n Sales volumes have increased steadily since 2010 and are
approaching pre-recession levels. MD 1 0.30%
VA 1 0.46%
n In the past two years, office investment sales in Cleveland
totaled more than $550 million. Total 3 2.22%
n New owners plan to improve the buildings’ amenities and
charge higher rents. Total 65 100.00%
Cleveland Office Attracts
More Out-of-State Investors
Source: JLL
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March | April 2018
CMBS 2.0
CMBS 1.0=bonds issued prior to 2009. CMBS 2.0=bonds issued after 2009.
Source: DBRS
COMMERCIAL INVESTMENT REAL ESTATE