In a letter sent to shareholders on Thursday, George J. Carter of Boston-based Franklin St Properties said that his company has retained Holliday Fenoglio Fowler, L.P. to facilitate the potential sale of the 28-story, 860,000 square foot office and retail tower at 303 East Wacker in Chicago.
Carter writes that “management is encouraged by the recent trend of rising rental rates in the East Loop which, in turn, could translate into a competitive advantage and increase the desirability of the Property.”
The building, which was 66 percent leased at the end of the second quarter of 2016, has recently been upgraded with amenities including a conference center, a Wi-Fi lounge and a management office on the second floor adjacent to the fitness center. Carter says these projects, as well as a café and bakery in the main lobby, which provides breakfast, coffee and lunch options from early morning to mid-afternoon, have been well received by occupants, prospective tenants and visitors.
Recent activity in the building, which also features a 294-stall underground parking garage, includes a new lease with C.C. Johnson & Malhotra for 5,231 square feet, an expansion with Stan Johnson Company for 2,759 square feet and a new lease with Advance Illinois for 5,577 square feet.
“Competition for signing new tenants in the East Loop has become increasingly fierce,” Carter writes. “During the past several years, a number of buildings in the East Loop have either undergone repositioning with significant capital improvement upgrades or have been sold. Management believes that many of the new owners have a relatively short-term hold strategy that employs an aggressive leasing approach, with extremely high concessions intended to attract large tenants in anticipation of a quick sale.”
As of June 30, 2016, the vacancy rate for Class “A” and Class “B” buildings in the East Loop was approximately 14.3 percent, according to CBRE. The office vacancy in downtown Chicago was approximately 11.7 percent as of June 30, 2016.
“We believe that the opportunity to lease the remaining vacant space at the Property, together with an improving and active Chicago office building investment climate, are combining to create a potentially advantageous sales opportunity for the holders of the Company’s preferred stock,” concludes Carter. “Any sale of the Property would be subject to a number of conditions …. At this time, we are not able to predict when or if that will occur.”
Franklin Street Properties Corp., the company’s sole common shareholder and the property’s asset manager, has an equity investment in the building totaling $82,813,000, owning the same preferred shares as all other investors.