At a time when office building prices are falling, a little-known New York developer has paid more than $38 million — an astounding $530 a square foot — for the new Hoffman Estates headquarters of an industrial clay producer.
A venture managed by Harold Thurman of New York-based Thurcon Properties Ltd. last week bought a 72,000-square-foot building in the Prairie Stone Business Park leased to Amcol International Corp., according to sources and public records. Amcol has a 20-year lease on the two-story structure, which was completed about two months ago.
Mr. Thurman, a veteran Manhattan real estate investor, could not be reached for comment. Andrew Sandquist, a senior vice-president in the Chicago office of CB Richard Ellis Inc., which brokered the deal, declined to comment.
The sky-high price could prove to be the folly of a reckless investor. But the transaction may also be the result of several unique factors, including the availability of very long-term financing and a deal structure favorable to certain tax-conscious investors.
On a per-square-foot basis, the transaction is one of the most expensive of the year, based on previous deals reported by New York research firm Real Capital Analytics Inc. It tops the $393 per square foot paid for UBS Tower, 1 N. Wacker Drive, a $540-million transaction, but is less than the $618 per square foot paid for the Whole Foods Market store at 3640 N. Halsted St., a $28.1-million transaction.
The seller was Boston-based CRIC Capital LLC, which paid about $33.6 million, or $466 a square foot, for the building in a sale/leaseback deal arranged with Amcol before construction started. As a result, CRIC, a joint venture of Prudential Real Estate Investors and Corporate Realty Investment Co., made a nifty profit of roughly $5 million. A CRIC executive could not be reached for comment.
Amcol agreed to move its headquarters to the building from Arlington Heights earlier this year. The building also includes 21,000 square feet of costly laboratory space. The lease requires annual rent increases of just 2%.
The price probably was boosted by the investment-grade credit rating of Amcol, which had income of $45.1 million during the first nine months of 2008.
Mr. Thurman’s venture assumed an existing 20-year mortgage at a time when long-term commercial real estate financing is scarce.
Tax considerations may also come into play. The mortgage has a so-called “pay down/re-advance” structure, similar to revolving line of credit, which some experts say can be used to avoid capital gains taxes under section 1031 of the federal tax code.
Founded in 1927, Amcol in addition to mining also offers water filtration and other services to oil and gas industry clients.
Source: Chicago Real Estate Daily
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