CHICAGO—As reported yesterday in GlobeSt.com, SterlingBay Companies just entered into a partnership with New York-basedJ.P. Morgan Asset Management that makes the lattera co-developer of the many Near West Side buildings Sterling hasbought since 2012. And today Sterling principal JohnGavin tells GlobeSt.com that such a partnership wasessential.

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

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

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

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

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Minneapolis will be one of its top targets. Gavin says the cityshares a lot of qualities with Chicago, including a concentrationof Fortune 500 companies, a vibrant downtown and a highly educatedworkforce. “That's where you will see a pick-up in ouractivity.”

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.