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Big deal: Groupon’s HQ is sold; Building owners to pocket huge gain as office market recovers.(headquarter)

Crain’s Chicago Business February 21, 2011 | Baeb, Eddie Byline: EDDIE BAEB While the real estate market has crashed since 2007, the bubble never burst for a landmark building that’s home to Groupon Inc. and a host of other technology companies.

The former Montgomery Ward & Co. catalog building on the edge of River North is set to be sold for $390 million, sources say, four years after a group of New York investors paid $290 million for it, at the peak of the real estate cycle. The stunning 35% appreciation, which defies the recession and plummeting property values nationwide, is further testament to the strong investor appetite for well-leased office buildings here that helped a couple of new downtown skyscrapers sell recently for record valuations. site groupon portland

When the mid-rise building last sold, in March 2007, more than a year-and-a-half before Groupon was founded, the sprawling complex that hugs almost a quarter-mile of the Chicago River’s North Branch was 78% leased. Today, it’s 98% leased, and several major tenants, including Groupon, have long-term contracts, giving its new buyers confidence in future revenue.

“Cash flow and occupancy are sort of the hot buttons these days–that’s what people are looking for,” says Michael Klein, a principal at GlenStar Properties LLC, a Chicago-based real estate investment and development firm not involved in the transaction. “It clearly didn’t hurt to have Groupon there.” The daily-deal website was founded in the 600 W. Chicago Ave. building, where Groupon backers Eric Lefkofksy and Brad Keywell have several other Internet companies. Groupon, after its most recent expansion, is now the fourth-largest tenant in the building’s 1.6 million square feet of office space. (The biggest tenant is Level 3 Communications Inc., an Internet service provider.) Groupon had to lease 11/2 floors in an East Loop office tower late last year for its 200-plus editorial team because there wasn’t enough space open in 600 W. Chicago. “Our intention is to move everybody back,” a Groupon spokesman told Crain’s at the time. “It’s definitely our preference that we’ll all be in the same building.” OFFERS CAME IN Real estate sources identified the buyer as CommonWealth REIT, a Newton, Mass.-based real estate investment firm. The sellers, who include real estate attorney Victor Gerstein, put the property up for sale last summer after getting unsolicited offers. Mr. Gerstein and representatives of CommonWealth didn’t return calls seeking comment.

The eight-story building was redeveloped in the early 2000s, almost two decades after retailer Montgomery Ward ceased operations there. The developers spent hundreds of millions of dollars on the project, installing a high-tech infrastructure to attract telecommunications firms and rechristening the building e-port. The city bolstered the project with $33.2 million in tax-increment financing. this web site groupon portland

After struggling because of the dot-com collapse and the building’s proximity to the Cabrini-Green public housing complex, the developers landed trendy restaurant Japonais and a David Barton health club. Since then, most of the Cabrini buildings have come down, and upscale townhouses and condominiums have sprouted up in the area.

‘SOME LUCK INVOLVED’ In recent years, the building has drawn more technology companies and electronic-trading firms whose workers, including many twentysomethings in jeans and T-shirts, fill the loft-style interiors.

Many of these tenants have held their own and even grown in the recession, while the suit-and-tie crowd that populates the Loop’s high-rises has slashed headcounts and pared office space. The Loop’s vacancy rate over the last two years has risen to 13.1% from 10.4%, according to real estate data provider CoStar Group Inc. in Washington, D.C.

“It’s been a great marketing effort, and there’s also been, let’s face it, some luck involved,” says Brad Despot, a senior vice-president at Chicago-based brokerage Jones Lang LaSalle Inc., leasing agent for the complex since 1999. He wouldn’t discuss the pending sale. “Who would have thought a year-and-a-half ago, when Groupon was really no tenant. And now they have 100,000-some feet.” Mayor Richard M. Daley lauded the building while speaking last week to the Economic Club of Chicago.

“That building has been a great success, and Groupon is one of its many visionary tenants who are identifying opportunities and taking risks to develop new processes, design new products and open new markets,” Mr. Daley said. “It is a thriving example of how government can support the technology industry.” Thomas A. Corfman contributed.

Baeb, Eddie

• http://www.itsmysea.com jon

  what about this. A more proffesional Map application is required – this a prototype. People should be able to mark different territory shapes, plant flags, make up rules and attract others in various ways. If there are webdevelopers there, I can pay.
  At least it illustrates a point.

• http://twitter.com/xtapol Xtapolapocetl

  On crime: we have created a massive bureaucracy that is draining this country dry (i.e. unprecendented theft on a national scale) and this is supposed to be a solution to small-scale petty crime? @georgedonnelly put it best: would you give yourself cancer in order to prevent cancer?

  On roads: the government massively subsidized the development of a transportation network that runs on oil, and we wonder why we're so dependent on dirty fuels?

  On poverty and welfare: private charities and churches did a much better job of taking care of the poor than the government ever has, without creating the systematic dependency that exists today as a result of government "assistance."

  On war: this is nothing more than one government fighting against another. Without government, war on any sort of large scale is impossible.

  There's a pattern here. Every problem the government attempts to tackle simply gets worse, and the expansion of government that comes along for the ride brings an entirely new set of problems with it.

  The answer is not for you and I to come up with alternative "solutions" to these problems. This just leads to the creation of another "government." The answer is for people to have the liberty to handle their own problems without resorting to the use of force to control the behavior and resources of others.

• http://www.skepticaleye.com/ SE

  Walter Block has done a lot of work on the roads and highways question.

  The Road to Freedom: An Interview with Walter Block

  There of course may be many other options available than the kind of privatization he advocates, but he certainly shows that the state is not necessary to provide the service.