Just over three years after moving its headquarters out of Chicago, Boeing is close to a deal to sell the 36-story office tower that the aerospace giant owns along the Chicago River.
Chicago developer Sterling Bay is negotiating a deal to buy the tower at 100 N. Riverside Plaza from Boeing, according to people familiar with the deal.
The deal is preliminary and still could fall apart amid challenges such as a sluggish leasing market and high borrowing costs.
Further complicating this deal is that Boeing is only selling the leasehold interest in the building, with the land beneath the tower owned separately. Ground-lease payments cut into profits and often make financing acquisitions difficult.
Chicago real estate professionals have wondered what will become of the tower since Boeing in May 2022 announced it was moving its headquarters from Chicago to the Washington, D.C., area.
Limited pool of buyers
Recently, Cushman & Wakefield brokers began quietly marketing the tower to a limited pool of potential buyers.
It’s unclear how much space Boeing might lease in the tower after selling it, or how many employees the company now has in the building. At the time of the headquarters announcement, Boeing said it had 400 Chicago workers and planned to maintain a large presence in the city.
Sterling Bay is expected to pay $25 million to $30 million for the property that is about 52% leased, according to Crain’s Chicago Business, which previously reported the deal.
Boeing and Sterling Bay did not immediately respond to requests for comment from CoStar News on Friday.
A few blocks west of the riverfront tower at 100 N. Riverside, Sterling Bay was instrumental in the redevelopment of Fulton Market from a meatpacking district to a neighborhood of office, residential and hotel towers.
Major deals involving Sterling Bay have included landing Google to anchor the redevelopment of the Fulton Market Cold Storage building and signing McDonald’s to anchor a ground-up project in a move of its global headquarters from west suburban Oak Brook, Illinois.
Sterling Bay’s move to buy the tower from Boeing comes with the firm’s massive Lincoln Yards mixed-use development stalled along the river on the city’s North Side, with Sterling Bay poised to lose some or all of the 55-acre site.
Earlier this month, JDL Development and Kayne Anderson Real Estate confirmed they have a deal to buy the northern portion of Lincoln Yards from lender Bank OZK, which previously seized the land.
But Sterling Bay has several ongoing projects in Chicago and in other U.S. cities, and it is betting that a revamp of Boeing’s longtime home will be attractive to potential tenants. Despite historically low demand for office space, there is a relative lack of high-end space overlooking the river.
Largest tenant
The largest tenant now paying rent to Boeing is Here Technologies, which leases about 280,000 square feet but has been trying to sublease about half of that space, according to CoStar data and people familiar with the property.
Boeing initially signed a 15-year lease in 2001 after the headquarters move from Seattle. The company later bought the tower for $165.2 million in 2005.
Industry professionals say they believe upgraded space at 100 N. Riverside is likely to be in high demand because of the dearth of large blocks available along the river, even in a building completed in 1989.
If Sterling Bay does complete the purchase, it would need to generate enough rental revenue to offset a ground lease with rent escalations over time, according to people familiar with the property.
CoStar News reported in 2022 that Boeing’s ground lease is owned by New York-based Stahl Organization on a 99-year agreement that runs until 2084. Stahl in 2021 refinanced its ownership of the dirt with a $40 million loan that matures in 2031, according to Cook County property records.
Boeing’s pending sale of the Chicago property would add to a run of property sales through the country over the past several years. At the time Boeing announced the headquarters move, the company had sold more than $1.1 billion in properties throughout the country over the previous three years, mostly in California and Washington state.
For the record
Boeing is represented in the sale by Cushman & Wakefield brokers Cody Hundertmark, Tom Sitz and Jeff Cole.