Signing up Google for a space in this former cold storage building brought even more interest to Sterling's targeted area

CHICAGO—As reported yesterday in, Sterling Bay Companies just entered into a partnership with New York-based J.P. Morgan Asset Management that makes the latter a co-developer of the many Near West Side buildings Sterling has bought since 2012. And today Sterling principal John Gavin tells that such a partnership was essential.

Renovating the more than 20 assets, which includes the giant Fulton Market Cold Storage building at 1000 W. Fulton and Fulton West, a portfolio of existing and partially completed office, retail and parking facilities, would run up about $750 million in project costs, far beyond Sterling’s capacity if it were to go it alone. “It was a very logical step for us to identify an institutional joint venture partner that allows us to execute the portfolio.”

What makes this partnership a bit unique, he adds, was that Sterling bought all of these assets before forming a partnership with a firm with really deep pockets. But it became imperative to quickly buy up the desirable assets in the rising neighborhood once the company generated national headlines last June by recruiting Google as its anchor tenant for 1000 W. Fulton, now known as 1K Fulton.

“Once we did that, all these new guys started coming in,” Gavin says. Therefore, Sterling started moving on parallel tracks, scooping up properties and, over the last six months, hammering out an agreement with J.P. Morgan. He could not give out details of the agreement, but did say it was a typical 90/10 partnership.

Gavin also says that Sterling will now focus on completing current Near West Side projects, which could take five to seven years, rather than looking for new properties in the neighborhood. However, going forward Sterling will do all of its future development with J.P. Morgan, giving it the means to expand beyond Chicago and into other Midwest cities.

Minneapolis will be one of its top targets. Gavin says the city shares a lot of qualities with Chicago, including a concentration of Fortune 500 companies, a vibrant downtown and a highly educated workforce. “That’s where you will see a pick-up in our activity.”