The Chicago investor who redeveloped a landmark factory building along the Kennedy Expressway into an office haven for environmentally friendly companies and the headquarters for freight logistics company Coyote Logistics is cashing out.
A venture of Chicago-based Baum Development, which bought the former Cooper Lamp Factory at 2545 W. Diversey Ave. on the city’s North Side in 2005 and repositioned it as the “Green Exchange,” is seeking $75 million for the 229,000-square-foot property, according to a source familiar with the offering.
A buyer at that price would mark a lucrative exit for Baum on a project that looked precarious when the market crashed but that the developer hung onto through the recession and eventually filled with tenants. It would also follow the lead of many office landlords opting to sell amid high property values and a healthy lending environment so deep into a real estate market cycle.
Baum paid $7.5 million for the building in 2005—a purchase it financed with a $5.9 million loan, according to Cook County property records—rebranded it as the Green Exchange and began rehabbing the property into an energy-efficient office building.
But construction financing dried up in 2008, forcing Baum to scramble to keep the project going. The firm eventually landed a construction loan in 2009 and in 2010 got a $15 million federally guaranteed loan that would be repaid by $10 million in tax-increment financing from the city, as well as proceeds from the project. The full $60 million renovation was completed in 2010.
Baum also secured a not-so-green first tenant at the same time in Coyote Logistics on a 65,000-square-foot lease and, after signing more tenants, went on to refinance the building in 2012 with a $26.5 million loan from Greenwich, Conn.-based LoanCore Capital, property records show.
Coyote would quickly turn into one of Chicago’s fastest-growing companies and eventually be acquired in 2015 by UPS for $1.8 billion. Now it leases 176,000 square feet—or 77 percent of the building—and recently recommitted with a 10-year extension of its lease through April 2034, according to a CBRE marketing flyer for the property. The entire building is 98 percent leased with 24 tenants, according to the flyer.
That leasing success has generated substantial operating profits for Baum at the Green Exchange. The property’s net operating income topped $4 million each of the past two years, and it is on track to match that this year, according to a Bloomberg report tied to the 2012 loan, which was sold to commercial mortgage-backed securities investors.
The Bloomberg report also showed the building was appraised at $38.2 million when Baum secured the loan in 2012, or roughly half what the venture is seeking today in a sale.
CBRE Senior Vice President Dan Deuter, who is representing Baum in the offering, said the developer is looking to sell but remains open to partnering with a prospective buyer and retaining an interest in the property.
“This is his baby, and he believes in the upside long term,” Deuter said of Baum Realty Group CEO David Baum. “So he would welcome the opportunity to continue to invest in it in a meaningful way.”
CBRE brokers Tom Sitz and Cody Hundertmark are also representing Baum in the offering.