John Hancock Signs for Chicago Trophy Asset

By Gail Kalinoski, Contributing Editor

John Hancock, the U.S. division of Toronto-based Manulife Financial Corp., is expanding its Chicago portfolio with the addition of One South Wacker, a 40-story, 1.2 million-square-foot, Class A office building in the city’s CBD, for $344 million.

The West Loop office tower was sold by Harbor Group International, which bought the building at Madison Street and Wacker Drive with investment partner Clal Insurance Co. in 2012 for $221 million. HGI had invested more than $12 million to renovate and reposition the asset, which was recently awarded LEED Gold for Existing Buildings certification.

“One South Wacker represents the type of high-quality assets we acquire in key gateway markets where we do business,” said Kevin Adolphe, president & CEO of both Manulife Real Estate and Manulife Asset Management Private Markets in a release.

“The acquisition is consistent with our strategy to seek out complementary core office towers that can provide long-term value for our global portfolio. We are proud to strengthen our commitment to the Chicago market with the acquisition of One South Wacker,” he added.

Ted Willcocks, global head of asset management, Manulife Real Estate, said in the release, “One South Wacker grows our Chicago portfolio to over 7 million square feet, one of our most active investment markets.”

Other Chicago properties owned or managed by John Hancock include 55 W. Monroe, 191 N. Wacker, 200 S. Wacker and 150 N. Michigan Ave.

The firm operates as John Hancock Real Estate in the United States and Manulife Real Estate elsewhere around the world. The company’s portfolio includes prime office and industrial properties and select retail and multi-family residential properties in key metropolitan centers in Canada, Asia and the U.S. As of March 31, the company had $13.2 billion in assets totaling more than 55 million square feet. Besides Chicago, John Hancock also owns properties in Boston, Los Angeles, New York, San Francisco, Atlanta and Washington, D.C., in the U.S.

One South Wacker was designed by Helmut Jahn and completed in 1982. Jahn also designed 55 W. Monroe, an 804,214-square-foot office tower which John Hancock acquired in September for $244 million. Willcocks told Commercial Property Executive at that time that the company was attracted to Chicago for its economics and job growth.

During its ownership of One South Wacker, HGI signed Serendipity Labs of New York to open and manage a 30,000-square-foot co-working lounge and conference center on the mezzanine level and second floor. The building became the first Class A Chicago office property to incorporate a full-service shared workspace and conference center as an amenity to tenants and the public, according to HGI. The building upgrades included the addition of a high-end, 8,000-square-foot fitness club, complete renovation of the lobby and exterior plaza and modernization of key building systems.

The building’s occupancy is currently at 83 percent, according to John Hancock.

A Colliers International Research & Forecast Report on Downtown Chicago/Office for First Quarter 2015 noted that buyers don’t mind acquiring buildings that aren’t fully leased because of the city’s hot office market.

“With the investment sales market surging and financing terms for non-stabilized assets more widely available, investors are no longer shying away from buildings with vacancy. Instead, these assets are viewed as opportunistic due to their repurposing potential,” the Colliers report stated.

Colliers noted in the report that both tenants and landlords seem to feel confident about the future.

“Tenants with expirations as far out as 2020 are now actively seeking space options, a sign of optimism about the future of their businesses,” the report said.

The West Loop is still the city’s leading CBD submarket with first quarter rents averaging $39.53, up from $37.82 in the fourth quarter last year and $36.81 in the first quarter of 2014, according to Colliers.

It is also the location for what is expected to be a record-setting sale in the city – the planned $1.33 billion acquisition of the Willis Tower at 233 South Wacker by Blackstone Real Estate Partners VII. The 110-story, 3.8 million-square-foot skyscraper is expected to change hands soon.