River North loft building sold to Ameritus-Alcion venture

“A venture of Ameritus Real Estate Investment Management and Boston-based Alcion Ventures paid $24.75 million for 213 W. Institue Place in River North. Photo from CoStar Group”

A River North loft building sold for almost $25 million to a buyer who expects to capitalize on rising rents in the city’s tightest office submarket.

A venture of Chicago-based Ameritus Real Estate Investment Management and Boston-based real estate private-equity firm Alcion Ventures paid $24.75 million Feb. 23 for the seven-story building at 213 W. Institute Place, according to Cook County records.

“I think there’s room to pump rents up to market over the next couple of years,” said Ameritus co-founder Jeb Scherb. “That area has experienced a lot of growth. We’re seeing a lot of developers showing a keen interest in that area. There’s a number of residential developments, which we think will only enhance that office submarket and enhance values.”

The price is lower than the approximately $27.5 million a venture of Chicago-based Sterling Bay and New York-based DRA Advisors were expected to pay for the 148,949-square-foot building in a deal that was never completed.

Even at the lower price, the sale represents a big return for a unit of New York-based Goldman Sachs that paid an undisclosed amount to buy the $8.5 million in debt on the property from Cole Taylor Bank.

Developer Charles Mudd had owned 213 W. Institute Place since 2004, when he paid $14.5 million. Cole Taylor Bank sued Mudd to collect on the $8.5 million loan in 2011, and that same year it sold the debt to the Goldman Sachs unit. After receiving a foreclosure judgment, Goldman Sachs took deed to the property in September 2013.

A Goldman Sachs spokeswoman did not return a call. A Sterling Bay spokeswoman declined to comment, and a DRA Advisors executive did not return a call.

The sale was brokered by the Chicago office of HFF. The deal was backed by a $22.9 million loan from Minneapolis-based U.S. Bank.

River North office vacancy was 9.2 percent at yearend, lowest among the six submarkets downtown, according to Los Angeles-based CBRE. Overall downtown vacancy was 13.2 percent.

River North asking rents were $34.46 during the fourth quarter, up 8.4 percent from a year earlier.

The loft building is 93 percent leased, but pending lease expirations will drop it to 88 percent, Scherb said. He views lease rollover as an opportunity, since Goldman Sachs leased up the building at rents that are now 15 to 20 percent below today’s market rates.

The new owners plan to renovate the lobby and corridors and may add amenities such as a conference center and lounge, Scherb said.

“There’s a lot of room to improve the building and enhance the experience,” Scherb said. “I think that will translate into rents commensurate with other River North buildings.”

Even before its latest deal, Ameritus has benefited from the strength of River North, Scherb said. Just across the river in the Loop, Ameritus has seen spillover leases in the tower at 205 W. Wacker Drive, which it bought in 2013, he said.