A Chicago investor has paid $60 million for a well-known, 41-story office tower along Millennium Park, taking over the property at about half its previous sale price and completing the largest office sale in the city since mid-2022.
R2 recently completed the long-expected purchase of the tower at 150 N. Michigan Ave., according to people familiar with the deal. The $60 million price is a massive discount from the nearly $121 million previous price and lower than the $70 million expected when R2’s deal to buy the 661,477-square-foot property was first reported last June.
It is the first major office tower sale of more than $50 million in Chicago since July 2022. The slowdown in deals has come amid historically low demand for office space since the start of the pandemic in early 2020, and a run-up in interest rates has further slowed the pace of property sales throughout the country.
The Michigan Avenue tower is known for its diamond-shaped top.
In an email to CoStar News, R2 CEO Matt Garrison described it as “an instantly recognizable Chicago icon” with “bold architecture.” He said the tower, built in 1984, is in excellent condition.
Garrison said R2 is looking to update some amenities to better reflect current tenant demands.
R2 is betting that by starting with a purchase price far below typical levels, the firm can retain tenants and add new ones at a time when many landlords struggle to pay for property improvements or aggressively pursue new deals.
“Sentiment in office capital markets is at an all-time low,” Garrison said in the email. “But people forget about the size and depth of Chicago’s 200 million-square-foot office market. Lease rollovers alone in Chicago are bigger than most urban markets in the country.
“Our thesis is pretty simple: Buy high quality assets at a reset basis. Be well capitalized. Improve the tenant experience to reflect today’s world. Retain key tenants and be open for business and ready to spend capital to fill the building.”
R2’s plans to buy the tower were first reported last year by The Real Deal Chicago. Meanwhile, the tower was more than 30% vacant.
The deal was slow to reach the finish line amid a slowdown in property sales throughout the country.
The sale price was about half the nearly $121 million in a 2017 deal with CBRE Investment Management and well below the value of an approximately $86.5 million loan on the property from MetLife Investment Management. MetLife provided seller financing to R2, according to people familiar with the deal.
R2 declined to comment to CoStar News about the price or financing. CBRE Investment Management declined to comment on the deal, and MetLife did not immediately respond to a request for comment from CoStar News.
About three years after the tower at 150 N. Michigan opened, it had a cameo appearance in the movie “Adventures in Babysitting,” starring Elisabeth Shue. In one scene, a child Shue’s character was babysitting dangled from the tower’s distinctive, sloped roof.
The building is at the intersection of Michigan Avenue and Randolph Street, a few blocks south of the Magnificent Mile shopping district.
“There is much conversation about the flight to quality in office,” R2 Principal Max Meyers added in an email. “But that is a small part of the story. Quality does not just strictly equate to ‘new.’
“We are seeing a tremendous demand in our portfolio for assets that are non-commodity and offer an A experience through thoughtful design and capitalized hands-on ownership. The story of office’s comeback is still being written and we are excited to add to it," Meyers said.
Before R2’s deal was completed, the last office sales of more than $50 million were three deals completed on the same day in July 2022, including a $105 million deal in which Google eventually will own and occupy the formerly state-owned James R. Thompson Center.
In one of the most attention-grabbing deals, investor Igor Gabal recently paid just $4 million for the leasehold interest in a 12-story building at 300 W. Adams St.
Other office sales have included Oregon-based Menashe Properties’ $45 million purchase of the 29-story tower at 230 W. Monroe St. and Chicago-based Coastal Partners’ $17 million deal for loft offices at 213 W. Institute Place.
For the Record
The seller was represented by Eastdil Secured brokers Bryan Rosenberg and David Caprile.