Cole Acquires 234 KSF HQ for Hillshire Brands Co. for $98M

By Keith Loria, Contributing Editor

Cole Real Estate Investments, a diversified real estate company, has acquired The Hillshire Brands Company’s headquarters in the West Loop of Chicago’s CBD on behalf of Cole Corporate Income Trust Inc. for $97.5 million.

The 233,869-square-foot headquarters facility was recently redeveloped by Sterling Bay Cos, which entered into a long-term net lease with Hillshire. The build-out included a complete restructuring of the infrastructure and building components, plus windows were added on all four exposures to increase its natural light.

“The Cole philosophy for single-tenant acquisitions remains consistent: we look for high-quality, income producing commercial real estate in strong markets, leased to creditworthy tenants under long-term leases,” Boyd Messmann, Cole’s senior vice president of office and industrial acquisitions, told Commercial Property Executive. “The Hillshire Farms headquarters property fits our criteria.”

According to Messmann, the West Loop submarket of the Chicago Central Business District is an emerging Chicago neighborhood that provides excellent visibility and accessibility with ample nearby public transportation. The building is one of the only Class A, single-tenant office buildings in the entire area.

“The Hillshire Brands Company headquarters is a mission-critical property in a great location. The property was recently redeveloped with new infrastructure and building components, and was the 2012 NAIOP Chicago Award for Excellence winner for office redevelopment of the year,” Messmann said. “When you factor in its long-term 15-year lease with an investment-grade tenant such as Hillshire Farms, this was an attractive acquisition for Cole.”

The transaction brings CCIT’s investment portfolio to 27 wholly owned properties in 15 states, totaling approximately 4.6 million square feet with a purchase price of approximately $731.1 million. More than 65 percent of CCIT’s portfolio consists of tenants rated by Standard & Poor’s, and of those tenants more than 88 percent are rated investment grade.

Additionally, the weighted average remaining lease term is nearly 11 years and the overall average credit rating of the rated tenants in the portfolio is A-.

“Cole continues to see development and tenant expansion increase in markets nationwide, which may lead to more supply for the remaining year and beyond,” Messmann concluded. “Our portfolio management team continues to focus on identifying and acquiring fundamentally strong properties with recognized tenants in markets across the United States.”