holliday fenoglio fowler, l.p. ( hff ) is an illinois
TRANSCRIPT
Holliday Fenoglio Fowler, L.P. (“HFF”) is an Illinois licensed real estate broker
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200 BUILDING
300 BUILDING
100 BUILDING
CDW CENTER(25 & 75 BUILDINGS)
PARKING DECK
Tri-State Tollway
Half-Day Road22
157,000+Vehicles Per Day
30,000+Vehicles Per Day
Holliday Fenoglio Fowler, L.P. (“HFF”) is pleased to present the unique oppor-
tunity to acquire the fee simple interest in Tri-State International Office Center (the “Portfolio”,
“Property” or “Tri-State”), a 559,204 RSF, fully amenitized, five (5) building office portfolio
located in Lincolnshire, IL. The Portfolio is 79.3% leased and derives income stability from its
anchor tenant, CDW, a Fortune 500 Company (#220) who recently relocated their headquar-
ters to the Property, fully occupying two buildings. CDW Center (209,021 RSF or 37.4% of the
Portfolio) is fully leased until November 2028 and has a parking ratio of 6.0 / 1,000 RSF due
to the recently completed parking deck. The remaining 100, 200 & 300 Buildings (350,183
RSF or 62.6% of the Portfolio) currently has 115,652 RSF of vacancy or 20.7% of the Portfolio,
offering a significant value-add component. The Portfolio features a balanced tenant roster
with 7.8 years of remaining lease term, and benefits from fantastic visibility and access from
the adjacent Tri-State Tollway. Further, the Property is proximate to the affluent North Shore
communities, which are home to the Chicago area’s executives and decision makers.
INVESTORS ARE
WELCOME TO BID
ON THE PORTFOLIO
OR CDW CENTER
SEPARATE FROM
THE 100, 200 &
300 BUILDINGS
2
3
E X E C U T I V E S U M M A R Y
S t a b l e C a s h F l o w w i t h Va l u e - A d d Up s i d e
The combination of the five assets presents a unique opportunity to acquire
the long-term stable cash flow provided by CDW at CDW Center (the 25 & 75
Buildings) and further enhance returns through the stabilization of the 100,
200 & 300 Buildings of the complex.
The 100, 200 & 300 Buildings sit southwest of CDW Center and are connected
by ground-level enclosed walkways. These buildings represent a value-add
opportunity through the lease up of the 115,652 RSF or 33.0% of current
vacancy, which will enhance immediate cash flow and drive residual value.
Tri-State International, constructed between 1984 and 1989, sits on 37.4 acres at the four-way interchange of the Tri-State Tollway (I-94)
and Half Day Road (Route 22), complemented by beautiful landscaping. The Portfolio is a newly upgraded, fully amenitized offering with
a conference center, 135-seat auditorium, and amenity center in the 200 Building, and a fitness center and deli (currently undergoing ren-
ovations) in the 300 Building. A recently completed 4-story parking structure was constructed for CDW’s employees and is immediately
northeast of CDW Center, which contributes to the Property’s above average 4.3 / 1,000 RSF parking ratio.
Inclusive of the parking deck construction, current ownership has invested over $15.1 million since 2013 to upgrade the amenities and to
implement other substantial improvements to the building systems, parking lot, building lobbies and multi-tenant corridors & restrooms.
Due to this recent capital infusion, a future investor is able to immediately capture new tenants seeking accessibility, visibility and Class A
Amenities all while providing an economical alternative to competing buildings on Route 60 (Townline Road) or Lake Cook Road.
KEY PORTFOLIO STATISTICS
Building Address: 25-300 Tri-State International
Rentable Area: 559,204 RSF
Land Site: 37.4 Acres
% Leased: 79.3%
Stories: 3, 4 or 5
Typical Floor Plate: 19,900 - 39,000 RSF
Year Built / Renovated: 1984-1989 / 2013-Present
Parking Spaces: 2,394
Parking Ratio: 4.3 / 1,000 RSF
SUMMARY OF PRIMARY TENANTS
SUMMARY OF PRIMARY TENANTS BUILDING LEASED RSF % SHARE (1)CURRENT RENT/RSF EXPIRES
REMAINING TERM
CDW 25 & 75 209,021 37.4% $16.25 Nov-28 11.3 yrs
LTD Commodities 200 & 300 61,633 11.0% $12.50 Aug-22 5.1 yrs
Solo Cup 300 22,715 4.1% $13.75 Sep-21 4.1 yrs
Wells Fargo Bank, NA 300 22,371 4.0% $13.50 Jun-20 2.8 yrs
NEC Enterprise Communication Technologies (2) 300 19,111 3.4% $19.00 Dec-28 11.4 yrs
Opus Capital Markets (3) 100 18,789 3.4% $19.50 Sep-19 2.2 yrs
Melinta Therapeutics 300 17,031 3.0% $13.79 Jun-22 4.8 yrs
Total / Weighted Average Lease Term 370,671 66.3% 8.6 yrs
(1)(2)(3)
Proportionate Share is based on Portfolio total of 559,204 RSFNEC Enterprise’s contractual LXD is 6/14/19; an amendment is out for signature, which analysis assumes is executed. The amendment includes Tenant downsizing by 8,042 RSF effective 6/19.Opus pays Gross Rent
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CDW CENTER Investment Profile: Single Tenant Triple Net Lease
Land Site: 14.8 acres (645,607 SF)
Remaining Term: 11.3 years (11/28 LXD)
Stories: 4
Completed / Renovated: 1989 / 2015-16
Typical Floor Plate: 27,450 RSF
Parking Ratio: 6.0 / 1,000 RSF
Guarantor: CDW Corporation
Rent / RSF: $16.25 with $0.50 annual escalations
Renewal Options: Two (2) five (5) year Options at Market
CDW Center – Single Tenant Net Lease Opportunity
CDW Center (209,021 RSF) comprises the 25 & 75 Buildings and represents
a true single-tenant net lease investment opportunity with an astounding
remaining term of 11.3 years with no termination option. CDW, a Fortune 500
Company (#220), is a leading multi-brand technology solutions provider to
business, government, education and healthcare organizations in the United
States, Canada and the United Kingdom, which recently relocated their head-
quarters to the Property in 2015. CDW leases 100% of CDW Center through
November 2028, and is responsible for all operating expenses and taxes for
the building, and the adjacent 4-story, 932-space parking structure – which
was constructed exclusively for the Tenant.
Further evidence of CDW’s long term commitment to the site is the $30/RSF
spent by the tenant above their $62.50/RSF Tenant Improvement allowance.
S u b P o r t f o l i o S u m m a r y
Due to the flexibility and uniqueness of the assets within the Portfolio, investors are
welcome to bid on the Portfolio in its entirety, or submit an offer on CDW Center
(209,021 RSF) separate from the 100, 200 & 300 Buildings (350,183 RSF). The fol-
lowing summaries and charts outline the potential sub-portfolios based on their
return profile.
“ Th e L i n c o l n s h i r e l o c a t i o n m a r k s a n e w c h a p t e r i n t h e C DW s u c c e s s s t o r y . Th i s b e a u t i f u l f a c i l i t y w i l l p o s i t i o n u s f o r e v e n m o r e g r o w t h a n d e n a b l e o u r t e a m s t o m o r e e f f e c t i v e l y c o l l a b o r a t e a n d i n n o v a t e f o r o u r p a r t n e r s a n d c u s t o m e r s .”
– Tom Richards, CDW Chairman and CEO
Source: http://www.cdwnewsroom.com/cdw-opens-new-execu-tive-office-inlincolnshire/#AdH3kFQt0Ww6tVx4.99
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E X E C U T I V E S U M M A R Y
TRI-STATE INTERNATIONAL – 100, 200 & 300 BUILDINGSInvestment Profile: Value Add Opportunity
Land Site: 22.6 acres (984,682 SF)
Building Address: 100 Tri-State 200 Tri-State 300-Tri-State
Rentable Area: 110,097 RSF 89,404 RSF 150,682 RSF
Total Rentable Area: 350,183 RSF
% Leased: 52.9% 45.5% 90.0%
Overall % Leased: 67.0%
Remaining Term: 4.3 years
Stories: 3 5 4
Completed: 1984 1986 1986
Renovated: 2015-16
Typical Floor Plate: 38,900 RSF 19,000 RSF 38,000 RSF
Parking: 1,140 spaces
100, 200 & 300 Buildings – Value Add Investment
The 100, 200 & 300 Buildings of Tri-State represent 350,183 RSF through a collection of three interconnected buildings and are 67.0%
occupied. The 100, 200 & 300 Buildings provide 115,652 RSF of vacancy allowing an investor to take full advantage of the current leas-
ing momentum in the North Suburban submarket. The North Suburban submarket currently boasts a direct Class A vacancy rate of
12.8%, down from 15.5% in 2010, representing overall net absorption of approximately 810,000 RSF. This represents the phenomenal
opportunity for an investor to implement an aggressive leasing program in order to capitalize on the surrounding corporate environment
and the North Suburban submarket’s fundamentals. An investor can also complete a number of capital projects, such as upgrading the
remaining restrooms and corridors in the 300 Building, replacing the roofs and upgrading the elevators.
In addition to this upside opportunity, the existing major tenants at the 100, 200 & 300 Buildings provide income stability. The six largest
tenants at the 100, 200 & 300 Buildings occupy 43.9% of the Property, and on an average weighted basis, have been at the Property for
more than 11 years. This includes LTD Commodities which has leased space at Tri-State International since 1998, and Wells Fargo whose
lease commenced in 2002. This speaks to their combined commitment to the Property which further provides stability of cash flow.
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N o r t h S h o r e L o c a t i o n w i t h S u p e r i o r A c c e s s i b i l i t y
Tri-State International benefits from its excellent positioning at the four-way interchange of the Tri-State Tollway and Half
Day Road (Route 22), near the prestigious North Shore. The North Shore is recognized for some of the Chicago area’s
most affluent and well-educated communities, where many executives and decision-makers are just a few miles away.
Within a one mile radius of the Property, over 75.8% of the population possesses a bachelor’s degree or higher level of
education, and the average household income is $236,722. These are astounding numbers compared to Lake County
as only 43.1% have earned a bachelor’s degree or higher and the average household income is $120,529. With many
executives and professionals calling the area home, the immediate area boasts a median housing value of $661,750,
which demonstrates the desirability of the region. Tri-State International Portfolio is well-positioned to tap the diverse
and skilled labor pool clustered in the Greater North Shore area.
The Property’s adjacency to the Tri-State Tollway provides tre-
mendous signage opportunities, along with superior accessibility
to the surrounding area. The Property is only 17 miles from O’Hare
International Airport which services over 87 million passengers
with non-stop flights to over 200 destinations. Two other regional
airports, the Chicago Executive Airport and Waukegan National
Airport are respectively 8 and 19 miles from the Property and serve
as an amenity to corporations and their executives. In fact, the
Waukegan National Airport has reached prominence as a base
of operations for “Chicagoland’s Fortune 500 Flyers.”
Fu l l y A m e n i t i z e d P r o p e r t y
Tri-State International Office Center offers tenants an unparalleled suite of on-site amenities, most
of which have been recently upgraded. These distinctive and highly desirable amenities help
to position the Property as a best-of-the-best asset in the market. On-site amenities include a
recently expanded fitness center with locker rooms (4,218 RSF), deli (3,143 RSF), 135-seat audito-
rium (3,580 RSF), conference room (916
RSF), and amenities center (835 RSF).
The deli is currently undergoing renova-
tion with a targeted completion date in
April 2017, with budgeted costs of up to
$400,000. To the right is a summary of
the capital costs associated with upgrad-
ing Tri-State International’s amenities.
Hi g h l y A t t r a c t i v e a n d E c o n o m i c A l t e r n a t i v e s
Current asking rates at Tri-State International Office Center offer a significant discount to Class
A alternatives in the area, while still providing physical characteristics and amenities consistent
with these higher cost buildings. Tri-State International sits on Half Day Road (Route 22) which
is halfway between Lake Cook Road in Deerfield, and Townline Road (Route 60) in Lake Forest,
when traveling along the Tri-State Tollway. However, the Class A net asking rents for office
buildings along these two corridors range from $16.50 to $22.00 per RSF, compared to Tri-
State International’s net asking rates of $13.50 per RSF. This is a 29% discount to the average
rental rate across these properties, which totals approximately 2.1 million square feet. As this
market leading competitive set of assets continues to tighten and asking rents continue to rise,
a number of value-focused office tenants will consider fully amenitized alternatives such as Tri-
State International Office Center.
TRI-STATE INTERNATIONAL – SKILLED LABOR POOL1-MILE
RADIUS3-MILE
RADIUS5-MILE
RADIUS LINCOLNSHIRELAKE
COUNTY ILLINOIS
% Attaining Bachelor's Degree or Higher 75.8% 71.7% 61.4% 68.2% 43.1% 32.2%
Average Household Income $236,722 $206,130 $157,001 $177,351 $120,529 $84,285
Median Housing Value $661,750 $636,174 $464,824 $530,609 $276,478 $193,011
AMENITY UPGRADE COSTSFitness Center $88,082
Locker Room $34,513
Auditorium Upgrades $157,685
Deli (Budgeted) $400,000
Total $680,281
(1) Deli's cost estimated per budget
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E X E C U T I V E S U M M A R Y
HISTORIC SUBURBAN V. CBD CUMULATIVE ABSORPTION
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
2010 2011 2012 2013 2014 2015 2016
Cumulative CBD Absorption (RSF)
Cumulative Suburban Absorption (RSF)Suburban Resurgence: 2.4 million RSF of net absorption in the
suburbs since 2014, versus 1.6 million RSF of net aborption in the CBD
Cum
ulat
ive
Abs
orpt
ion
(RSF
)
Absorption (%
)
S t r e n g t h o f t h e S u b u r b s
Recent media reports have portrayed a central business district in Chicago that significantly
out-paces suburban markets in both real estate fundamentals and investment potential.
Contrary to such reports, suburban fundamentals continue to improve and often outper-
form the CBD in key indicators including cumulative absorption, which has outpaced CBD
absorption by over 2.3 million RSF since 2010. The continued strength of economic growth
in the Chicago suburban markets provides well informed investors the opportunity to enter
a rising market at a highly competitive basis.
Suburban corporate and infrastructure investment
growth has also outpaced investment growth in the Chi-
cago CBD. In the last two years, over 70% of investments
and jobs created have been attributed to the suburbs as
opposed to the Chicago CBD. Companies are invest-
ing over $2.2 billion in the Chicago suburbs, of which
over $307M is being invested within the North Suburban
Submarket with major recipients including Lincolnshire
and neighboring Bannockburn, Northfield and Gurnee.
Such robust investment likely foreshadows institutional
investors return to suburban markets.
# of Investments $ of Investments (million) # of Jobs Created
99
244
$707
$2,220
3,962
9,487S U B URBS
CBD
S U B URBS
CBD
S U B URBS
CBD
Source: Conway New Plant & Expansion 2016 Report
90
294
94
94
94
41
41
2222
83
53
21
60
6868
137
21
To Downtown Chicago
SKOKIE
EVANSTON
WILMETTE
WINNETKA
HIGHLANDPARK
LAKE FOREST
DEERFIELD
NORTHBROOK
GLENVIEW
NILES
WHEELING
LINCOLNSHIRE
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FORTUNE 500 HEADQUARTERS IN CHICAGO MSACHICAGO RANKING COMPANY
FORTUNE 500 RANKING INDUSTRY
2015 REVENUES(IN MILLIONS) LOCATION
■ 1 Walgreens Boots Alliance 19 Food and Drug Stores $103,444 Deerfield,IL2 Boeing 24 Aerospace & Defense $96,114 Chicago, IL3 Archer Daniels Midland 41 Food Production $67,702 Chicago, IL4 United Continental 80 Airlines $37,864 Chicago, IL
■ 5 Allstate 81 Insurance $35,653 Northbrook, IL■ 6 Mondelez International 94 Food Consumer Products $29,636 Deerfield, IL
7 Exelon 95 Utilities: Gas and Electric $29,447 Chicago, IL8 McDonald's* 109 Food Services $25,413 Oak Brook, IL9 Sears 111 General Merchandisers $25,146 Hoffman Estates,IL10 US Foods Holding 122 Wholesalers: Food & Grocery $23,128 Rosemont, IL
■ 11 AbbVie 123 Pharmaceuticals $22,859 North Chicago, IL■ 12 Abbott Laboratories 138 Medical Products & Equip. $20,661 Abbott Park, IL■ 13 Illinois Tool Works 211 Industry Machinery $13,405 Glenview, IL■ 14 CDW 220 Information Tech. Services $12,989 Lincolnshire, IL
15 R.R. Donnelley & Sons 255 Publishing, Printing $11,257 Chicago, IL16 Navistar International 281 Motor Vehicles and Parts $10,140 Lisle,IL
■ 17 Discover Financial Services 283 Commercial Banking $10,002 Riverwoods, IL■ 18 W.W. Grainger 285 Diversified Wholesalers $9,973 Lake Forest, IL■ 19 Baxter International 286 Medical Products & Equip. $9,968 Deerfield, IL
20 Univar 315 Miscellaneous $8,982 Downers Grove, IL■ 21 Tenneco 334 Motor Vehicles and Parts $8,209 Lake Forest, IL
22 LKQ 369 Diversified Wholesalers $7,193 Chicago, IL23 Dover 377 Industrial Machinery $7,029 Downers Grove, IL
■ 24 Anixter International 391 Diversified Wholesalers $6,596 Glenview, IL■ 25 Baxalta 420 Pharmaceuticals $6,149 Bannockburn, IL
26 Jones Lang LaSalle 436 Real Estate $5,966 Chicago, IL27 Old Republic International 442 Insurance $5,766 Chicago, IL
■ 28 Packaging Corp of America 446 Packaging, Containers $5,742 Lake Forest, IL29 Motorola Solutions 451 Network & Commun. Equip. $5,695 Chicago, IL30 Ingredion 456 Food Production $5,621 Westchester, IL31 Arthur J Gallagher 471 Diversified Financials $5,392 Itasca, IL
■ 32 Essendant 477 Wholesalers: Elect. & Off. Equip. $5,363 Deerfield, IL33 Telephone & Data Systems 496 Telecommunications $5,176 Chicago, IL
Source: Fortune (2016) Suburban-based Headquarters ■ North Suburban-based Headquarters
*McDonald’s will be moving to downtown Chicago in 2018
Tenants enjoy the excellent white collar labor force, high image
office parks and lower Lake County property taxes. The scarcity
of land sites in prime locations, heightened regulation of develop-
ment and the soaring cost of construction will mitigate speculative
development, contributing to rent growth and lower vacancy rates.
C h i c a g o’s P r e m i e r O f f i c e S u b m a r ke t
The North Suburban submarket’s strong demographics and high-end housing stock provide an exceptional labor pool that keeps vacancy rates con-
sistently below the suburban average and makes it the premier option for Chicago area companies. Of the 23 Fortune 500 companies headquartered
in Suburban Chicago, 15 are located in the North Suburban Submarket – including CDW, which is headquartered at the Property. Many of the Chicago
area’s largest employers are concentrated in the North Suburban submarket including Abbott Laboratories, Allstate, Anixter, Aon Hewitt, Astellas, CVS
Caremark, Hospira, Illinois Tool Works, Takeda and Walgreens.
90
294
94
94
94
41
41
2222
83
53
21
60
6868
137
21
To Downtown Chicago
SKOKIE
EVANSTON
WILMETTE
WINNETKA
HIGHLANDPARK
LAKE FOREST
DEERFIELD
NORTHBROOK
GLENVIEW
NILES
WHEELING
LINCOLNSHIRE
9
Substantial Discount to Replacement Cost
Tri-State International provides investors the opportunity to acquire a Class A office portfolio at a substantial discount
to replacement cost, providing a competitive basis for years to come. Due to the dearth of available land sites and the
rising cost of construction, the replacement cost of a similar asset would be in excess of $360 per rentable square
foot. New developments would require net rents in excess of $33 per rentable square foot, which is approximately 2.5
times the Property’s current market rents. This spread creates the ideal path to rent growth and a hedge against future
speculative development in the area.
E X E C U T I V E S U M M A R Y
NET RENTAL RATE COMPARISON
$-
$10.00
$20.00
$30.00
$40.00
Tri-StateInternational
NewConstruction
GR
OSS
REN
TS
$13.50 /RSF
59% discount toreplacement rents$33.00 /RSF
SUBURBAN CLASS A OFFICE REPLACEMENT COST/SF
Land $35
Core & Shell $160
Tenant Improvements $75
Parking $50
Total Hard Costs $320
Lease Commissions $26
Financing Costs $10
Other Soft Costs $5
Total Soft Costs $41
Total Development Cost ($/GSF) $361
Yield on Cost 9.00%
Net Rents $33
©2017 Holliday Fenoglio Fowler, L.P. (“HFF”), HFF Securities L.P. and HFF Securities Limited (collectively, “HFFS”) are owned by HFF, Inc. (NYSE: HF). HFF operates out of 24 offices and is a leading provider of commercial real estate and capital markets services to the global commercial real estate industry. HFF, together with its affiliates, offers clients a fully integrated capital markets platform including debt placement, investment sales, equity placement, advisory services, loan sales and commercial loan servicing. For more information, please visit hfflp.com or follow HFF on Twitter @HFF.
HFF has been engaged by the owner of the property to market it for sale. Information concerning the property described herein has been obtained from sources other than HFF and we make no representations or warranties, express or implied, as to the accuracy or completeness of such information. Any and all references to age, square footage, income, expenses and any other property specific information are approximate. Any opinions, assumptions, or estimates contained herein are projections only and used for illustrative purposes and may be based on assumptions or due diligence criteria different from that used by a buyer. Buyers should conduct their own independent investigation and rely on those results. The information contained herein is subject to change.
Contact InformationHFF Chicago181 West Madison | Suite 3900Chicago, IL 60602Telephone: 312.528.3650Fax: 312.528.3651
Investment ContactsBryan D. RosenbergAssociate [email protected]
Patrick M. ShieldsAssociate [email protected]
Mark B. KatzSenior Managing [email protected]
Jeffrey M. BramsonSenior Managing Director/Managing [email protected]
Jaime M. FinkSenior Managing [email protected]
Yoonjin ChooReal Estate [email protected]
Debt ContactsChristopher S. CarrollManaging [email protected]
Trent R. [email protected]
Leasing ContactsJonathon ConnorVice President – Colliers [email protected]
Steve KlingPrincipal – Colliers [email protected]