Dermody Properties purchased the 232-acre property of the former Allstate campus in the Chicago suburb of Glenview, Ill., in October 2022 for $232 million.
In more than 10,000 trips driving past the former Allstate campus in the Chicago suburb of Glenview, Ill., Douglas A. Kiersey, Jr., chief executive officer and president of Dermody Properties, never imagined the iconic site located adjacent to the Tri-State Tollway would be redeveloped into a logistics campus.
Allstate relinquished the majority of its sprawling headquarters office campus after the work-from-home model became popular during the COVID-19 pandemic. Dermody Properties purchased the 232-acre property, which lies between Kiersey’s home and Dermody Properties’ Chicagoland office, in October 2022 for $232 million. The Reno-based industrial developer plans on erecting up to 3.2 million square feet of new Class A industrial space across 10 buildings.
“I have lived in this area for over 20 years, and it never occurred to me that someday the intersection of work-from-home and ecommerce would make that iconic campus worth more as a logistics campus than an office campus,” Kiersey told NNBW in an interview last week. “Not in 1,000 years did it ever occur to me that we would be having this conversation.”
Transitioning former office campuses, shuttered industrial or functionally obsolete retail facilities into Class A logistics campuses is a relatively new line of business for Dermody Properties, but it’s also an arena for which the company is gaining national renown. The former Allstate property isn’t the only conversion ball Dermody Properties is juggling – in September the company acquired 198 acres that formerly housed a coal-fired power plant owned by We Energies in Pleasant Prairie, Wisc.
In order to ensure proper decommissioning, We Energies demolished the power plant prior to divesting the land, Kiersey said. Mass grading and horizontal infrastructure construction is underway for LogistiCenter at Pleasant Prairie. Dermody Properties plans on constructing a range of build-to-suit facilities on the site depending on customer demand, Kiersey added.
Both projects are drastically different, but they share one commonality: Premier location. Land location is the most important factor in these types of industrial redevelopment projects, Kiersey said.
“It’s everything. When the land is located close to transportation infrastructure, population, rooftops, and all the other amenities – that’s the whole driver. We start with where our customers want to be, and then we start looking for redevelopment opportunities in those areas. It’s our job to fulfill demand by finding these types of properties and delivering high-quality logistics space.”
Although the former We Energies power plant is located in Wisconsin, it’s just one freeway interchange away from the Illinois border, in what most consider a submarket of the greater Chicago industrial market, Kiersey noted. Businesses benefit from tax advantages offered by the State of Wisconsin, but they can still service customers throughout the Greater Chicago metropolitan area. The location of the Pleasant Prairie site is particularly unique because it offers dual rail service from Canadian Pacific and Kansas City railway and Union Pacific, and it also has access to ample water from nearby Lake Michigan. And since it was a former power plant, it has unmatched power capacity adjacent to the site, Kiersey noted.
“For some of our customers, direct dual rail access is a real difference maker,” he said “We also can serve customers that need processed water, like food service companies, and we can serve customers that need heavy power. Those three things differentiate us.”
Redevelopment opportunities can be extremely complex, Kiersey added. For the Allstate campus, Dermody Properties had to raze nearly 2 million square feet of Class A office space to create a blank slate for industrial development. Due to the proximity to the Tri-State Tollway, Dermody Properties was unable to implode the buildings and instead had to use a wrecking ball to take down two office towers of 11 and seven stories.
It’s taken more than a year to demolish existing infrastructure piece by piece, building by building. Dermody Properties is repurposing as much of the material as possible, Kiersey noted. After completing asbestos abatement — the buildings were constructed in the 1960s and ’70s — many of the sinks, toilets, doors and other reusable fixtures were removed and put up to auction. Steel scrap is being recycled, and concrete rubble and asphalt from the massive parking lots will be ground into base material for on-site fill.
“Basically, nothing is wasted,” Kiersey said.
The first phase of the new logistics campus in Glenview will include five speculative buildings totaling 1.2 million square feet that’s expected to come online in spring of 2024. A portion of one building, 187,000 square feet, has already been preleased to UPSIDE Foods for a commercial cultivated meat processing facility.
The balance of the campus, 125 acres, is being held for build-to-suit customers, Kiersey said. When the campus is fully completed, Dermody Properties’ expected investment will be about $650 million, he added.
“We are looking out over an eight-to-10-year horizon,” Kiersey said. “We want to make sure we are investing in a market or submarket where it's very hard to replicate what we are doing, so that as a landlord over the long-term we are going to have pricing power because these are irreplaceable buildings and one-of-a-kind assets that can’t be replicated.
“We believe that will attract very high-quality customers, our rents will be attractive, and that will create cash flow over a period of years that ultimately will prove attractive to a potential buyer. Great real estate in great locations attracts great customers; that is our mantra.”
The redevelopment arena continues to be a growing source of revenue and opportunity for Dermody Properties.
In 2019, Dermody Properties acquired a shuttered General Motors assembly plant on 88 acres in Boxwood, Del. and created LogistiCenter at I-95 Wilmington, a five-story, 3.8-million square-foot logistics facility that was wholly occupied by Amazon. In 2021, Macquarie Asset Management Real Estate of Sydney purchased the facility for $392 million in the largest single-asset industrial acquisition for the year.
Dermody Properties also is nearing completion of redevelopment of the former U.S. headquarters of Japanese imaging and electronics maker Ricoh in Tustin, Calif. Located next to the 55 Freeway, LogistiCenter at 55 will feature two buildings totaling just under 312,000 square feet.
“This has grown to be a specialty for which we are becoming pretty well known as a group that has the ability to conceptualize and execute on these complicated projects,” Kiersey said. “We have development professionals in 10 regional offices, and between them they cover about 20 U.S. markets. We source these opportunities through local relationships with sellers and brokers, and we want to be the brand that can execute on this type of business. It’s complicated, but we have the access to equity capital, debt, and the internal expertise to execute these opportunities from start to finish.
“There’s a great deal of potential in the future,” Kiersey added. “There’s a lot of upfront work, but once we get through that work we create something that’s very unique and very valuable. For us, that’s been the attraction. The Dermody Properties brand nationally is now associated with these types of redevelopment projects.”
