A firm that has owned some of Chicago’s largest buildings has a contract to buy a 30-story office tower on the eastern edge of the Loop business district for about $63 million, a steep discount from previous pricing.
New York-based 601W Cos. has a contract to buy the approximately 944,000-square-foot tower at 303 E. Wacker Drive, according to people familiar with the deal.
That is far below the $182 million that Boston-based Beacon Capital Partners paid in 2018, and much less than the nearly $156 million loan that Bank of American provided at the time of the sale.
Despite at one time bringing occupancy above 90% and making capital improvements to the Ludwig Mies van der Rohe-inspired tower, Beacon is set to follow the trend of towers in Chicago and other large cities selling at steep discounts from previous valuations as remote and hybrid work trends persist nearly five years since the onset of COVID-19.
The deal for 303 E. Wacker has not yet been completed, and it still could fall apart amid historically sluggish demand and financing challenges in the office sector.
Creative options
Longtime owners of office buildings, even ones that have outperformed the sluggish market, have gotten creative to bolster their existing investments at a time when financing options are scarce.
In 601W’s case, that includes bringing in former boxing champ Floyd Mayweather Jr. as an investor in its office portfolio. Mayweather invested an undisclosed sum in 601W’s $10 billion portfolio of office buildings, which includes 410 10th Ave. in New York’s Hudson Yards, the Harborside complex in Jersey City, New Jersey, and the 83-story Aon Center tower and sprawling Old Post Office in Chicago, The Real Deal reported last month.
Others, including Beacon, have scooped up bargain purchases even while trying to fend off financial distress in other properties. Beacon earlier this year paid just $125 million for the 36-story tower at 333 W. Wacker Drive, which previously sold for $320.5 million in 2015.
Meanwhile, Beacon has vowed to try to keep possession of the Mies-designed, 52-story AMA Plaza office tower at 330 N. Wabash Ave. after being hit with a foreclosure suit last month.
Beacon and 601W did not immediately respond to requests for comment from CoStar News on Tuesday. Bank of America declined to comment.
Leasing challenge
Cushman & Wakefield brokers began marketing 303 E. Wacker for sale in August, with the loan set to mature at the end of this year. The pending maturity left Beacon unable to continue leasing momentum in the property in recent years, which was boosted by a recent $32 million upgrade that included a full amenities floor on the top level, according to Cushman & Wakefield.
The property was almost 77% leased to 51 tenants, with a weighted average lease term of 4.9 years at the time it went on the market for sale, according to a brochure from the brokerage.
Designed by Joseph Fujikawa, the tower was completed in 1979.
If it completes the purchase as expected, 601W will take on a new leasing challenge in the East Loop, where the firm previously has taken on larger lease-up projects including the Aon Center and the two-tower Prudential Plaza.
For the record
The seller is represented by Cushman & Wakefield brokers Tom Sitz, Cody Hundertmark and Dan Deuter.