Allstate said Monday it is selling most of its sprawling headquarters campus in Northbrook for $232 million, a deal that stems from changing work patterns and the insurance giant’s desire to cut expenses.
But the sale could lead to a land-use fight in the northern suburbs. The buyer is Dermody Properties, a Reno, Nevada-based developer of warehouses. Chicago-area communities have organized to oppose new distribution sites they believe will create congestion, noise and pollution.
The sale agreement, filed with the U.S. Securities and Exchange Commission, said the contingencies include whether the buyer gets local approval to redevelop the property.
Douglas Kiersey Jr., Dermody’s president, said his company wants the property because “its combination of location and scale is rare” in a metropolitan area. He said his early plan calls for building 3.2 million square feet for logistics firms, an investment of more than $500 million.
He said the development will draw e-commerce providers eager to deliver merchandise quickly. “They want to compete on customer service levels,” Kiersey said.
Allstate said in a news release the sale is expected to close in 2022. “Allstate is selling the property as employees have more choice about where they work and many are choosing to work from home. The company plans to keep a significant presence in the Chicago area, including its existing office space in downtown Chicago.”
The company also said the sale will reduce its real estate expenses and help it transform into “a low-cost insurer with broad distribution.”
The SEC filing said the property at 2775 Sanders Road consists of 232 acres. Allstate said it has about 2 million square feet of offices there in several buildings. It has a Northbrook mailing address, but most of it is in unincorporated Cook County.
Dermody’s acquisition includes 30 acres in Prospect Heights, with the rest unincorporated, Kiersey said. The site is just outside the village limits of Northbrook and Glenview.
Kiersey said his company will discuss annexation with any of the suburbs. He said he hasn’t decided about tax incentives, but those may be needed to offset higher costs of doing business in Cook County versus the collar counties.
The talks could put the towns in competition with each other for tax revenue from the project.
Kiersey said the site, between Interstate 294 and a forest preserve, will minimize any impact trucks may have on homeowners. The trucks will head straight to the Tri-State Tollway, and there is ample room for building setbacks and green space, he said. “We will keep the ponds along Sanders Road. We will keep as many mature trees as possible,” Kiersey said.
Notinh that Allstate used to have 13,000 workers on the property and the roads already have been designed for heavy volume, Kiersey said, “Our traffic count will be lower than what was there before.”
Home and auto insurers, flush with premium income, used to like real estate as an investment and favored large offices. But Allstate has been pressured by low-cost operators, making its landscaped campus a luxury.
With the onset of the pandemic, Allstate reported that 95% of its employees are working from home anyway.
Allstate did not immediately specify what portion of its site would be excluded from the sale. The company moved to Northbrook in 1967.
Officials in Northbrook and Glenview could not be reached.
The mayor of Prospect Heights, Nicholas Helmer, said he’s had no discussions about the property but spoke favorably of using it for warehouses. “That land is well removed from some of the problems that arise” from distribution facilities, he said. Helmer also said such a project would generate tax revenue without increasing school enrollment.
Kiersey said Dermody operates in 15 major markets. The privately owned firm has developed or acquired 100 million square feet of logistics and industrial properties and values its holdings at more than $6 billion.