Prime Group's Downtown Portfolio in Play

CHICAGO-Prime Group Realty Trust’s suburban office and industrial portfolio remains on the block after one potential deal fell through, but the REIT may now be disposing of some of its 6 million sf of Downtown office assets as well. That could include its $350-million Dearborn Center project under development.

“We are pursuing a sale or joint venture of several of our Downtown office buildings,” Prime Group chairman Michael W. Reschke said in a recent conference call. Asked directly about reports that Bank One was buying Dearborn Center, Reschke said, “We’re not in a position to comment on that transaction at this time.”

Besides the 1.5-million-sf project at Dearborn and Adams Streets, Prime Realty’s Downtown holdings consist 1.353-million-sf One IBM Plaza at 330 N. Wabash Ave., 944,556-sf 77 W. Wacker Dr., 874,742-sf 208 S. LaSalle St., 846,759-sf 33 W. Monroe St. and 770,191-sf 180 N. LaSalle St. The decision to throw Downtown office assets into its mix of offerings was made after seeing other buildings in and around the Loop sell for prices approaching a “high-water mark,” Reschke says, as well as discussions with office brokers. “The quantity and quality of buyers and the interest from buyers was very strong,” he adds.

Meanwhile, the next dispositions may be in the REIT’s industrial portfolio. “The investment climate for industrial assets in Chicago is very good and at the moment we’re optimistic we’ll complete a transaction by the end of the year,” Reschke says.

Several domestic entities are taking a look at the industrial portfolio, Reschke says, and the suburban office portfolio also is getting some consideration following a real estate opportunity fund’s decision not to close on its contract with Prime Realty after completing its 45-day due diligence.

“We are still in discussions with the fund, but we do not believe we’ll complete a transaction at this time,” Reschke says.

The eight million-sf suburban office and industrial portfolio account for 40% of Prime Group’s net operating income. The largest and most visible property is the 925,000-sf Continental Towers complex in northwest suburban Rolling Meadows, along the Northwest Tollway. The three-tower office center was one of four local finalists in Boeing Corp.’s search for its new world headquarters. However, the REIT’s largest suburban office tenant is struggling telecommunications giant Motorola Corp., which recently finished one of two buildings in nearby Deer Park.

Reschke said in February that the REIT could remain a going concern after spinning off its suburban portfolio and sticking with its Central Business District assets.