The 35-story office building at 401 N. Michigan Ave. is seen May 23, 2017. Chicago-based Walton Street Capital has agreed to buy the building for about $370 million, according to sources. (Brian Cassella/Chicago Tribune)
A Michigan Avenue office tower whose plaza will include Apple’s new flagship store is about to get a new owner in a $370 million deal.
That comes as the 50-story Leo Burnett Building on Wacker Drive is set to go up for sale. Valued at an estimated $530 million, it will be the most valuable office tower to hit the market in downtown Chicago so far this year.
Chicago-based Walton Street Capital has agreed to buy the 35-story office building, 401 North Michigan, for about $370 million, according to sources.
If the deal is completed as expected, the sale price for the former Equitable Building would be more than triple the $120 million that Chicago’s Zeller Realty Group paid Equitable Life Assurance Society of the United States in 2001.
The approximately 760,000-square-foot office property includes a 22,000-square-foot Apple store that is under construction on the plaza alongside the office tower and the Chicago River. Apple’s glassy new store is expected to open in October, about two blocks south from its current Mag Mile location.
Zeller has invested heavily in the property, including the Apple store, which the Tribune previously reported would cost about $27 million to construct.
In addition to the Apple store, the Michigan Avenue property is known for Pioneer Court in front of the office building. Zeller has had several public art installments on the plaza, including a current Abraham Lincoln statue and a previous one of Marilyn Monroe.
The property is just south of Tribune Tower, along the north side of the river.
The largest office tenant is the Accreditation Council for Graduate Medical Education, which leases more than 100,000 square feet.
Zeller is expected to maintain a small ownership stake and to continue to lease and manage the property.
Walton Street Capital principal Stephen Sotoloff declined to comment. Ari Glass, Zeller principal, chief investment officer and president, could not immediately be reached for comment.
Zeller is being represented in the sale by CBRE brokers including Blake Johnson.
Walton Street is a private equity firm led by billionaire Neil Bluhm.
Crain’s Chicago Business first reported Walton Street’s deal on Michigan Avenue.
A few blocks west of the Michigan Avenue property, the Swiss owner of the Leo Burnett Building plans to seek a sale of the more than 1.1 million-square-foot structure. It is owned by an investment fund managed by UBS Realty.
The sale by UBS could test the staying power of an already yearslong rally of downtown Chicago office values. That run has included Blackstone Group’s Chicago-record $1.3 billion acquisition of 110-story Willis Tower in 2015 as well as an $850 million sale of the tower at 300 N. LaSalle St. in 2014 and a $712 million sale of the Aon Center in 2015.
Apple’s new Chicago flagship store on the riverfront is taking shape. The roof is going in place this week as March draws to a close.
(Nancy Stone / Chicago Tribune)
Nearly $6.5 billion was invested in downtown Chicago office sales in 2015, a record volume, according to New York-based Real Capital Analytics. Volume fell below $3.7 billion in 2016. Just under $418 million was invested in the first quarter of this year, the lowest quarterly total in four years.
UBS is believed to be seeking offers of around $530 million for a Leo Burnett property that is more than 93 percent leased. The venture of Zurich-based UBS bought the Wacker Drive tower in a 2011 deal that valued it at $401 million.
UBS spokeswoman Sheryl Lee confirmed plans to sell the building but declined to provide an expected price.
"Its potential sale is part of the normal portfolio management process within the fund aimed at maximizing risk-adjusted return to investors," she wrote in an email.
Virtually all of the property’s space is leased to two tenants: advertising conglomerate Publicis Groupe, which has firms including Leo Burnett Worldwide and Starcom Mediavest Group in the building, and law firm Winston & Strawn. Both leases extend well into the 2020s, meaning a buyer would be assured of steady long-term rental revenue.
Another huge property, the office and parking portions of the 100-story John Hancock Center, is expected to go on the market this year, owner Hearn Co. recently said.