A Chicago landmark in the Loop business district and a larger office tower in the heart of the Magnificent Mile shopping avenue are the latest office buildings in line for price cuts as the property sector continues to face historically low demand and sales volume.
Lenders for the 36-story tower at 444 N. Michigan Ave. and the 19-story Inland Steel Building at 30 W. Madison St. in the center of the Loop have hired brokers to sell the properties at what is expected to be large discounts to previous prices.
The deals are the latest examples locally and nationally of lenders taking charge of distressed buildings, either on their own or in partnership with owners that in recent years have become underwater on loans as companies slash space and many employees stick to remote or hybrid work schedules.
After several interest rate increases, some lenders also are offering new loans at below-market rates to limit their losses on existing loans, as is the case with at least one of the new Chicago properties coming onto the market.
The newest offerings come after buildings, such as the 41-story tower at 150 N. Michigan Ave. and the office portion of 20 W. Kinzie Ave. sold at massive discounts to their debt, and as the prominent, 36-story tower at 333 W. Wacker Drive is headed toward a similarly discounted deal.
444 N. Michigan Ave.
In the larger new deal, Blackstone Mortgage Trust has hired CBRE in what that brokerage’s brochure describes as a “lender directed sale” with the potential for “attractive seller financing” provided by Blackstone.
If the property sells, it could be at a huge discount to the $138 million that Los Angeles-based CIM Group and Chicago’s Golub & Co. paid in December 2018, a year before the onset of COVID-19, according to Cook County property records.
Their acquisition was backed by over $123 million in debt from Blackstone that was packaged and sold to investors. A balance of about $95 million remains on the recently matured loan, according to Real Estate Alert, which first reported the two Chicago buildings going to market.
Just more than 34% of the approximately 517,000-square-foot building is vacant, according to CBRE, which hints at two potential investment strategies besides signing new office tenants: redeveloping some floors into an alternate use, such as apartments; or subdividing lower-level retail floors and office floors into separately owned investments, as has been done in other towers on the city’s best-known retail street.
Retail space at the base of the tower is fully leased to the Coach clothing chain, Hoka shoe brand and the local Purple Pig restaurant.
Blackstone declined to comment. Golub and CIM did not respond to requests for comment from CoStar News.
Inland Steel Building
The tower at 30 W. Madison has been owned for more than 16 years by New York-based Capital Properties, but JLL is listing its “$56.6 million non-performing loan” available for sale. The loan matures in December 2026.
The approximately 251,000-square-foot tower is 43% vacant, according to JLL.
Capital Properties paid $57.25 million in November 2007, and the firm later refinanced the tower with a $60 million loan from New York Life Insurance in 2016, per county property records.
The lender and building owner did not respond to requests for comment from CoStar News.
Built in the 1950s, the tower was designed by Skidmore, Owings & Merrill architects Walter Netsch and Bruce Graham. It was declared a Chicago landmark in 1998.
The stainless steel-and-glass building is known for several firsts in the city, according to the Chicago Architecture Center, including having air conditioning; indoor, underground parking; and automated window washing and mail distribution.
For the Record
The 444 N. Michigan sale is led by CBRE brokers David Knapp, Blake Johnson, Arthur Johnson and John Saletta. The Inland Steel sale is led by JLL brokers Sean Ryan and Kyle Kaminski.
CoStar News reporter Mark Heschmeyer contributed.