ComEd-Leased Buildings Drawing Interest

However, Marcus & Millichap Real Estate Investment Brokerage Co. stresses potential double-digit returns through tax benefits of the $113.7-million offering, which went out to prospective buyers two days before Christmas. According to Marcus & Millichap, the new owners could recoup their down payments—9% of the purchase price--with the tax savings within five years to 6.5 year of ownership. In addition, they would assume debt of $103.3 million if they acquired both buildings, which total 432,906 sf.

So far, two private investors have put in offers on 2 and 3 Lincoln Center, with at least one more bid expected soon, John Glass, director of Marcus & Millichap's San Francisco-based national retail group, tells GlobeSt.com.

"It's actually going quite well, considering we started over the holidays," Glass says. "It's a very, very unique deal. It's something that lends itself to a passive loss play, or as a tax shelter vehicle."

Although private investors have turned in the first two offers, interest so far has come primarily from institutional investors, Glass reports.

Commonwealth Edison has an option to buy the office buildings, off Butterfield Road and at the junction of 22nd Street, when its lease expires in 2017. Or the utility with $15 billion a year in revenue can exercise the first of four five-year options.

The deadline for bids is Jan. 24, with a decision expected a week later, according to Marcus & Millichap's procedure. Closing is expected in early March.

Built in 2001, the 10-story 2 Lincoln Center has 252,594 sf. ComEd has subleased more than half the building—131,706 sf—to IBM through 2011. The utility has proven Glass' case for rental upside by charging $22 per sf, earning an extra $650,000 a year on the deal. However, that is offset by a $50 per sf tenant improvement allowance ComEd has agreed to provide.

Sold separately, 2 Lincoln Center could be had for $65.6 million, according to the offering.

The 180,312-sf, six-story 3 Lincoln Center also was built in 2001. It can be acquired separately for $48.1 million, according to the offering.