Hines buying Goose Island office property for $47 million

The pending sale is an example of real estate investors flocking to new and recently renovated office buildings with stable income from long-term tenants amid the uncertainty of the COVID-19 pandemic. The two-story brick building is fully leased to a series of companies, including CB2, Lakeshore Beverage, Elite Staffing and logistics firm Transportation One, and the property has more than seven years of average weighted lease term, a measure of tenants’ remaining lease commitments.

The deal also stands to generate a profit for R2, which bought the property in 2015 for just under $13 million, according to Cook County property records. R2 leased it back to the seller, entertainment set designer Chicago Scenic Studios, before inking an office lease with CB2 in 2019 and beginning a redevelopment of the property.

R2 took out a $29.6 million construction loan from CIBC Bank in April 2020, property records show, to complete the redevelopment and lure new tenants. The full cost of the building’s renovation is unclear, and a spokesman for R2 couldn’t be reached.

The property includes a roughly 117,000-square-foot office building and a 40,000-square-foot parking garage, according to a flyer from brokerage Cushman & Wakefield, which is representing R2 in the sale.

The deal would mark R2’s second big Chicago property sale to Hines in recent months. Hines late last year paid more than $30 million for an R2-owned building at 2501 W. Bradley Place, home to WGN-TV’s studio. That followed another deal in which Hines paid close to $100 million for a four-building, 467,000-square-foot office and industrial campus just north of the WGN property.

A Hines spokesman did not provide a comment on the Goose Island deal. The firm is best known locally for its high-rises and is developing Salesforce Tower, the last of three skyscrapers built at Wolf Point along the Chicago River. It previously developed the River Point office tower at 444 W. Lake St. and the office tower at 300 N. LaSalle St., among other high-profile Chicago projects.

R2 has spent years leading a charge to turn once-industrial Goose Island properties into trendy offices, a movement that was supercharged by a 2017 zoning change by the city to allow new commercial uses on a 760-acre swath of the gritty North Branch of the Chicago River. In one of its highest-profile projects along the river, R2 is converting the former Morton Salt warehouse along Elston Avenue and the river into a mixed-use entertainment venue.

Further south on Goose Island, Canadian developer Onni Group is aiming to develop around 2,700 apartments on a former Greyhound bus maintenance facility site at 901 Halsted St., a project dubbed Halsted Pointe. The project would mark the first-ever residential development on Goose Island.

Cushman & Wakefield brokers Cody Hundertmark, Tom Sitz and David Knapp marketed the North Branch property on behalf of R2.