Prime Group Receives $43M Refi for 11 LaSalle

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CHICAGO-Prime Group Inc., based here, has received $43.3 million in refinancing for 11 S. LaSalle St., also known as the Roanoke Building. The company received the refinancing from KBS Real Estate Investment Trust Inc.

The loan has a term of three years. The interest rate was not disclosed. The refinancing was arranged by Matt Schoenfeldt and Mike Kavanau with Holliday Fenoglio Fowler LP.

Prime Group acquired the 330,000-sf building in October 2006 for $19.1 million. The company purchased the Roanoke Building out of bankruptcy, Prime Group chairman and CEO Michael Reschke says. “It was a great opportunity to create value,” he says. “It is a historic building in an A+ location.” The building had fell into a “state of disrepair,” particularly during the approximate two years of bankruptcy proceedings when no maintenance was done, no leasing was done and tenants were vacating the building, he says.

Last month, a $25-million renovation began on the exterior of the building. Interior work will begin once Prime Group receives the building permits. The renovations include cleaning of the exterior of the building, reconstruction of the lobby, new elevators, a new sprinkler system, remodeling of the common corridors on the multi-tenant floors, upgrading the emergency generator, tuck pointing and restoring the exterior facade ornamentation. Additionally, exterior lighting will be installed so the tower will be illuminated at night, he says. The renovation is expected to take about a year.

Occupancy for the building is currently about 60%. There are no major tenants, with the largest tenants leasing no more than 20,000 sf, Reschke says. Tenants include small insurance companies, law firms and accounting firms, he says. The building has 16,000 sf floor plates. The asking lease rate is currently $27 per sf gross, and Reschke says the asking lease rate will increase to $30 per sf gross when the renovations are completed.

The building is listed on the National Register of Historic Places and Prime Group is seeking city landmark status, Reschke says. With the landmark status, Prime Group can receive a federal tax credit of 20% of the construction cost and receive approximately a 50% reduction in real estate taxes for 12 years, he says. The building was designed by the Chicago architectural firm of Holabird & Roche and the original 16 stories were constructed in 1915. In 1922, the building was increased to 21 stories, and then to its current 35-story height in 1925. The building was originally called the Chicago Lumber Exchange and “has a lot of history to the building,” Reschke says. The building has a bell tower which will be made operational during the renovations, he says.