Buyer confirms deal for 300 N. LaSalle
(Crain's) — A real estate investment trust sponsored by KBS Realty Advisors LLC confirmed Thursday afternoon that it has a contract to buy 300 N. LaSalle St., agreeing to pay nearly $503 a square foot, the highest price ever paid for a downtown office building.
KBS Real Estate investment Trust II Inc. has already put up $20 million in earnest money to secure the purchase, according to a filing with the Securities and Exchange Commission. The $655-million price tag is more than sources have previously expected.
Related story: KBS agrees to buy 300 N. LaSalle from Hines for $625 million
A spokeswoman for the seller, developer Hines Interests L.P., declines to comment.
On a per-square-foot basis, the sale shatters the previous record price of $403 per foot set in 2008, when an affiliate of Hines acquired 1 N. Wacker Drive for $540 million, according to real estate data provider CoStar Group Inc.
But the acquisition is big bet on law firm Kirkland & Ellis LLP, which accounts for 53% of the 60-story structure under a lease that runs until 2029, according to the filing.
Kirkland's average annual rent over the life of the lease is $36.95 a square foot, the filing says. The legal giant, with 650 lawyers in Chicago, would account for about 20% of the start-up REIT's annualized base rent.
Completed last year, 300 N. LaSalle is 93% leased to 24 tenants, including the law firm. The building's current annualized base rent is about $43.7 million. Base rent typically does not include additional charges, such as a tenant's portion of taxes and operating expenses.
The average annual rent is $35.97 a square foot and the average current length of the building's leases is 15.7 years.
Because all of the building's leases have not yet started, 300 N. LaSalle was just 75% occupied as of Dec. 31, with an average annual rent of $28.71 per square foot. But factoring in rent abatements for several tenants, including Kirkland, lowered the 2009 average annual rent to just $4.56 a foot.
In the filing, KBS also confirmed an earlier report that MetLife Inc. had agreed to finance the transaction. The five-year, $350-million loan would charge annual interest of 4.25%, the filing says.
The loan accounts for 53% of the purchase price.
Hines will continue to manage the property after the sale is completed. The filing does not disclose when the deal is scheduled to be completed, but sources have previously said the transaction is expected to close within 30 days.
Real estate firm Holliday Fenoglio Fowler L.P. brokered the sale.
