Sullivan Center offices to sell for $175 million

The landmark Sullivan Center is about to get a new owner, and it's a familiar name in Chicago real estate.

New York-based investor 601W Cos. has a deal to buy the office portion of the 15-story building on State Street — onetime home of the Carson Pirie Scott department store — for about $175 million, according to sources. The deal does not include the ground-floor retail space, including a large Target store, which is owned separately.

601W already is a well-known player in Chicago, where it owns the Aon Center and is redeveloping the massive, vacant Old Main Post Office building along the Chicago River. As it buys the Sullivan Center offices, 601W is close to completing an approximately $680 million sale of the two-tower Prudential Plaza office complex near Millennium Park.

The seller of the Sullivan Center offices is a venture of New York-based firms KKR and Madison Capital. If the sale to 601W is completed as expected, KKR and Madison Capital will make a huge return on their $267 million purchase of the entire Loop building in April 2016.

They already sold the retail portion of the building for almost $147 million in August 2016 to Acadia Realty Trust, a Rye, N.Y.-based real estate investment trust.

601W principal Mark Karasick did not respond immediately Tuesday to requests for comment.

Madison Capital partner J. Joseph Jacobson and a KKR spokeswoman declined to comment.

The building, named for its architect, Louis Sullivan, is actually several buildings that have been combined in various phases of construction, starting in the late 1800s.

The 833,000 square feet of office space is almost fully leased, but 601W faces a large potential vacancy. State agencies, including the Illinois Department of Employment Security, lease the largest block in the building, with almost 243,000 square feet, according to CoStar Group. The state has an upcoming renewal option on the space, and it's unclear whether it will move out of some or all of the space, according to people familiar with the building.

Walgreens' e-commerce unit leases about 194,000 square feet in the building. Other tenants include architecture firm Gensler, the School of the Art Institute of Chicago, and technology firms Centro and Raise.

KKR and Madison Capital are represented in the sale by Jones Lang LaSalle brokers Bruce Miller and Nooshin Felsenthal.

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