909 Davis: Leasing Agents to Make a Million Dollars in Commissions
An investigation into the Evanston's RFP process for relocating City Hall
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If you haven’t heard, the Evanston City Council approved a plan to move City Hall to a property at 909 Davis Street. The process of identifying buildings and collecting RFPs was run by the City’s Leasing Agent, Jones Lang LaSalle. I FOIA’ed a copy of the documents that were put together by JLL, you can read it here.
Below is a summary I calculated for each property and the total cost of that property over a 15 year lifespan. Getting the numbers right here is tricky - the City only really negotiated the rate and terms with 909 Davis, so that property benefits from that.
So for 909 Davis, the total rent cost over 15 years is about $20.1 million. My calculations account for the annual rent increase, and you can see my math here. This is an incredibly good deal for the landlord at 909 Davis, given that acquired the building in December 2022 in an all-cash transaction for $27.8 million.
Let’s look at the properties in more detail. For comparison, I drove around on this rainy morning and took pictures of all three buildings. This will help you get a sense of the true aesthetic you’ll be enjoying as an Evanston resident.
1. 909 Davis St
Proposed Premises: The entire third floor (approximately 37,145 RSF) is the primary space offered. There's also potential to include Suite 100 (1,447 RSF) and/or a portion of Suite 210 (14,363 RSF) depending on the City's needs.
Owners: Red River Asset Management - They are the owners of the building at 909 Davis St, Evanston, IL.
Total SF Requested: 52,955 RSF
First-year cost per RSF: $23.00 (base rent) + $19.01 (OpEx & Taxes) = $42.01
On-Site Parking: Executive-only1
2. 1603 Orrington
Proposed Premises: Two full floors are immediately available: Suite 500 (13,922 RSF) and Suite 800 (13,968 RSF, available May 1, 2024). Additionally, several spaces are currently listed for sublease and may become available depending on the existing tenants' decisions: Suite 400 (7,277 RSF), Suite 1000 (5,298 RSF), and Suite 1500 (14,252 RSF). These could be potential expansion options for the City.
Total SF Requested: Initially seeking around 35,000 RSF, but with potential interest in additional spaces currently available for sublease, the total could reach closer to 50,000 RSF or more depending on the City's needs and future growth plans.
Owners: Golub Realty Services LLC: They represent the ownership of the building at 1603 Orrington, Evanston, IL. The specific ownership entity is GRE-GOCO Orrington Owner LLC. Golub Realty Services LLC also provides on-site property management for the building.
First-year cost per RSF: $28.50 (base rent) + $24.47 (OpEx & Taxes) = $52.97
On-Site Parking: Attached heated garage
3. 1560 Sherman Ave
Proposed Premises: The landlord initially proposed the entire seventh and sixth floors, totaling 37,216 RSF. However, there are existing tenants on those floors until December 31, 2024, although there's a possibility of earlier vacancy. Alternative options include the fourteenth and fifteenth floors (availability not specified) and approximately 15,000 square feet of scattered vacancies throughout the building.
Additional Space: The City expressed interest in obtaining 1,500-3,000 SF on the first floor. While no space is currently available, the landlord is actively seeking options to fulfill this request.
Owners: Rotary International: This Illinois non-profit corporation owns the building at 1560 Sherman Ave, Evanston, IL, also known as One Rotary Center. They own the property outright, with no partners or debt. Cushman & Wakefield manages the property with an on-site office.
First-year cost per RSF: $39.50 (base rent) + $22.50 (OpEx & Taxes) = $62.00
On-Site Parking: Attached Garage
Million Dollar Commissions
If you look at the RFP document, you’ll also see a section on commissions:
Tenant is represented by Jones Lang LaSalle Midwest, LLC. (“Broker”). Tenant requires Landlord to enter into a separate agreement with Broker, under which Landlord agrees to pay a real estate commission equal to a full market commission.
This doesn’t tell me much, so I reached out to both the city and the agents from Jones Lang LaSalle (Mr. McCarthy, Mr. Cummins, and Mr. Spinnell)2 to ask what “full market commission” meant. JLL didn’t get back to me but the city did:
A full market commission in this market currently ranges from $1.25-$1.50 per square foot, per year. Commissions are paid by the Landlord.
So let’s do some math. If we take each building’s approximate square footage and multiply it by the full market commission, we get the following over the full 15 year lifespan of the lease.
These agents will make some real money off this deal. Over the 15 years of this deal, the JLL guys could make around a million bucks. One can argue that it’s not the city paying this commission, it’s paid by the building owner. But surely the owners bake this commission into the price - I certainly would if I owned a building.
Lastly, we don’t know what the true commission rates are since that is not disclosed. Is it really between $1.25 and $1.50? How can we know that they didn’t make a backroom deal to pay $2.00 per sq foot or more? The commercial real estate market is functionally in free fall right now, so I’d be pretty desperate if I was a building owner.
I then asked the city if JLL will disclose to the city the final commission that is paid on the lease with 909 Davis?
No. That is private information between two private entities.
This is kind of puzzling to me. The City is about to sign a lease for $20.1 million over 15 years and the city is not even interested in knowing what the leasing agent is making off of the deal? Surely they have the negotiating leverage to ask for this.
Given that one of the City’s major complaints with the current City Hall is that the ADA accessibility is not very good, this was the only property without on-site parking.
Here we are again in a City that claims to care a great deal about racial and gender equity yet is giving this massive deal to three white guys.
No one in public service here feels like they owe it to the taxpayers to get the highest ROI on any endeavor. I don’t get Biss’ crap argument that we can’t renegotiate because it makes us look bad. The rental market for commercial space is in the dumpster and we hold the power here. Who is getting paid for this? Let’s see who the corporate backers of his next campaign (clearly for state or national office) are.