CHICAGO — KBS Real Estate Investment Trust III (KBS REIT III), a public non-traded REIT based in Newport Beach, Calif., has closed on the purchase of 500 West Madison, an iconic, 1.5 million-square-foot mixed-use tower in Chicago, for $425 million plus closing costs. The purchase is KBS REIT III’s largest and brings its total acquisition volume to $1.26 billion. This is the first time the tower has been offered for sale.
“We believe that 500 West Madison is a trophy-quality asset with highly unique work-style advantages that encompasses everything KBS REIT III looks for in an investment,” says Charles Schreiber, CEO of KBS REIT III.
The mixed-use tower, also known as Citigroup Center, features office and retail components. The 40-story building is located in the city’s West Loop submarket, which ishome to the majority of newer Class A office developments within Chicago’s central business district (CBD). The property sits above Ogilvie Transportation Center, one of two main suburban train stations connecting the Chicago suburbs with downtown, and provides direct access to city trains, buses and expressways.
The tower’s first two levels contain nearly 64,000 square feet of retail space with 45 stores and restaurants. The tower is also LEED Gold certified for sustainability and was 93 percent leased at the time of purchase.
Other KBS-affiliated companies own assets in the Chicago area, including the 23.7-acre Woodfield Preserve Office Center in Schaumburg, Ill., and the 1.3 million-square-foot 300 North LaSalle office tower on the north bank of the Chicago River in Chicago’s CBD.
KBS REIT’s acquisition of 500 West Madison is the latest in a series of high-quality purchases and the largest since the REIT began operating in 2011. The transaction follows KBS REIT III’s $121 million (excluding closing costs) purchase earlier this month of 201 Spear Street a 246,563-square-foot, waterfront Class A office tower in San Francisco’s South Financial District.
“500 West Madisonis another recent prominent acquisition KBS REIT III has made in the office arena,” says Ken Robertson, KBS central regional president. “We feel the West Loop has become the epicenter of new development, adaptive re-use and urban renewal in Chicago’s CBD and we intend to make strategic improvements at 500 West Madison to help maintain its status as one of the top business addresses there. We believe this is an iconic asset in this submarket that is literally connected to the transit grid of the entire region.”
— John Nelson