Developers Shopping Fulton Market Building After Landing Kimberly-Clark
The consumer products giant's new landlord aims to be the latest developer in the trendy corridor to cash out with a big windfall.
The developers that brought consumer products giant Kimberly-Clark to their Fulton Market District building have put the property up for sale, hoping to cash out with a hefty profit as the effects of the COVID-19 pandemic wane and the former meatpacking district starts to regain its corporate allure.
A joint venture of Chicago-based Domus Group and Northbrook-based Barnett Capital has hired the Chicago office of brokerage Stan Johnson to sell the 97,302-square-foot building at 1133-1155 W. Fulton Market.
There is no asking price for the four-story building, where Kimberly-Clark, the Irving, Texas-based maker of Kleenex tissues and Huggies diapers, announced last month it would move its North American commercial center from Wisconsin to be closer to its retail partners. Sources familiar with the offering said the property is expected to fetch bids of close to $70 million, or at least $700 per square foot.
A sale at that price would net a big windfall for Domus and Barnett, which paid $19.5 million in February 2019 for the former industrial building, according to Cook County property records, and set out with a plan to turn it into a loft office building as a parade of companies were paying high rents to set up corporate offices in the gritty-turned-trendy corridor.
The owners inked a deal for all of the building's office space that summer with co-working giant WeWork, then took out a $43.5 million loan in October 2019 from Fifth Third Bank to renovate the building and help build out WeWork's space. But things changed a few months into the pandemic, when WeWork bought out its lease and sent Domus and Barnett back into the market for tenants.
Domus and Barnett modified the loan last October to reduce its balance to $27.7 million, property records show. Domus Managing Director Phillip Ciaccio said in a statement the owners made the move since they no longer needed the full loan to help fund WeWork's buildout. Ciaccio declined to comment on whether the group took on more debt or other financing to help Kimberly-Clark build out its office.
Despite downtown office vacancy sitting at an all-time high and the rise of remote work casting doubt on office space demand, the developers have reason to believe they can get a high price for the property because of the sums paid for other Fulton Market office buildings anchored by publicly traded companies. Mondelez International's new headquarters at 905 W. Fulton Market was sold last April—a month into the pandemic—for more than $86 million, with nearly $880 per square foot, a record high for a Chicago office building. In October, developer Sterling Bay sold McDonald's new headquarters at 110 N. Carpenter St. for close to $413 million, downtown's biggest office building sale in two years.
Both of those deals illustrated investors' appetite for newly built office buildings fully occupied by high-credit, long-term tenants that provided steady cash flow amid the uncertainty of the COVID-19 crisis.
Unlike the McDonald's and Mondelez buildings, Domus and Barnett's property still has all of its ground-floor retail space available, totaling about 9,000 square feet. Terms of Kimberly-Clark's lease are also unclear, and Stan Johnson Managing Director Brandon Duff declined to comment on those details. But the state of Illinois said last month that Kimberly-Clark is eligible for as much as $19 million in payroll tax credits over 10 years, depending on whether it maintains or expands the 250 promised new jobs it is bringing to the new location.
Duff, whose firm specializes in selling so-called net-lease properties that are occupied by single, long-term tenants, said he's gotten a substantial initial response from prospective buyers. "The seller is just taking advantage of what's been a strong market," he said.
A Barnett Capital spokesman did not provide a comment.