Evanston Office/Medical Building slated to sell for $35 million

(Crain's) — A Boston-area real estate investment firm is set to close on a downtown Evanston office building where a more lucrative deal with a local buyer fell through last fall.

The six-story building at 909 Davis St. is expected to sell for about $35 million, or about $180 per square foot, according to one person familiar with the transaction. The buyer, Wakefield, Mass.-based Franklin Street Properties, is expected to close Friday.

Last fall, Northbrook-based Romanek Properties Ltd. was close to buying the building for more than $39 million before the deal fell through. That sale would have fetched about $200 per square foot.

James Postweiler, a managing director with Chicago-based Jones Lang LaSalle Inc. who is representing the seller, declined to comment. The building's owner, a German real estate fund advised by New York-based Real Estate Capital Partners L.P., bought it for $34.2 million in 2003.

The buyer and seller were not immediately available late Tuesday.

Built in 2002, the structure, with 195,245 square feet of office space, is fully leased, according to real estate data provider CoStar Group Inc. The largest tenant is textbook publisher Houghton Mifflin Harcourt, which subleases much of its 149,000 square feet but has a lease until 2017. The ground floor includes some retail.

“It's the best building in town, by far, because of the amenities,” says William Novelli, a CB Richard Ellis Inc. senior vice-president in the local office who previously listed the property but is no longer affiliated with the building.

The north suburban building has nearby access to Metra and CTA trains, as well as retail and condominiums. In Evanston, an existing building is an attractive investment because of high construction costs and a relative lack of available land for new developments, Mr. Novelli says.

“It would be difficult to build that today,” he says.

Franklin Street Properties' portfolio includes many suburban office buildings, and it also organizes real estate investment trusts.

The pending deal in Evanston comes at a time when a shaky economy has caused increased caution among potential buyers in the suburbs, some real estate observers say.

“Right now it's probably been a little tempered compared to what it was,” Mr. Novelli says. “The suburbs have had more of the users buying and only a few investors buying. There's still a demand, for the right deal. For the most part, buyers are hesitant because of the uncertainty.”