After writing a big check to refinance a skyscraper on North Michigan Avenue, Chicago billionaire Neil Bluhm is eyeing the sale of another property a few blocks away in a deal expected to fall short of paying off the loan.
Bluhm’s Walton Street Capital and lender ING are working with JLL brokers to seek a buyer for the 35-story office tower at 401 N. Michigan Ave. along the Chicago River, according to people familiar with the situation.
JLL is expected to formally bring the approximately 811,000-square-foot building to the market soon, with ING involved in the process because the sale price is likely to fall short of the value of a $160 million loan the bank issued to Walton Street in 2019, the people said.
Although it is likely to continue a trend of short sales, the deal at the southern tip of the Magnificent Mile shopping district is viewed by local real estate professionals as a test case for office values because it is a well-located tower with low vacancy.
While some office buildings in Chicago and in other large cities have sold for small fractions of their remaining debt, it’s possible ING could suffer a relatively small hit, according to people familiar with the property.
The riverfront building, completed in 1965, is next to Tribune Tower and across the street from the Wrigley Building. It is 90.6% leased, according to CoStar data.
Walton Street bought the property for $360 million in 2017, according to CoStar data. It later sold an Apple flagship store and other retail space connected to the base of the tower at 401 N. Michigan to Invesco for $90 million in 2019.
After selling off the retail, Walton Street refinanced the offices with the $160 million loan from ING, according to Cook County property records. Walton Street and the lender now face a loss on the sale of the office building amid falling values because of high borrowing costs, low office demand and sluggish property sales volume throughout the country.
Walton Street and ING did not respond to requests for comment from CoStar News.
Bluhm, a casino and real estate magnate, recently experienced the effects of falling valuations just a few blocks north on the Mag Mile.
CoStar News earlier this month reported that another of Bluhm’s firms, JBM Realty, is refinancing the 900 North Michigan Shops vertical mall and office space within the 66-story tower with a new $180 million loan. Because that debt is replacing a larger, maturing loan, Bluhm’s firm is putting in $56.4 million in new equity to cover the difference in loan size, future leasing costs and other expenses, according to a loan presale report.
North Michigan Avenue is best known as a shopping destination, but it also has many office, residential and hotel towers.
With office demand low in the area, a Connecticut-based developer is considering converting much of a 24-story office tower at 500 N. Michigan into 320 apartments.
The largest office sale in Chicago thus far in 2024 was Beacon Capital Partners’ $125 million deal for the 36-story tower at 333 W. Wacker Drive. That price was well below the tower’s last sale price of $320.5 million in 2015, a time when values were soaring.