Two decades after selling a 36-story office building at the confluence of the north and south branches of the Chicago River, a Boston-based investor is in talks to buy it back at a big discount to previous prices.
Beacon Capital Partners is negotiating to buy the building at 333 W. Wacker Drive, a structure known for is curved, green-tinted exterior, according to people familiar with the agreement.
The deal has not been completed, and it still could fall apart at a time of low property values, weak demand from tenants, higher interest rates and other factors that have made sales of office buildings challenging to complete throughout the country in recent years.
A price could not be determined, but it is expected to be below the $156 million value of the loan that the AFL-CIO Building Investment Trust took out from German’s Allianz Life Insurance in 2015.
The Washington, D.C.-based AFL-CIO trust’s $320.5 million purchase of the tower in 2015 came as property values were soaring in Chicago's Loop business district because of a strong real estate market nationally. Chicago also was in the midst of a wave of of corporate headquarters moves into the city from the suburbs and other municipalities.
Beacon is a longtime investor in Chicago office towers, including a previous stint as owner of 333 W. Wacker. Beacon and Chicago-based partner John Buck sold it for $208 million to German investor KanAm Group in August 2004, according to CoStar data.
The agreement to buy it back, with Allianz expected to provide new debt to Beacon, is the latest Chicago example of plunging office values because of high borrowing costs, corporate cutbacks and persisting remote and hybrid work trends.
In another recent example, offices at 20 W. Kinzie St. in River North sold for $20 million, one-third the amount of the loan on the property. One of the best-known properties to sell at a steep discount was the 41-story tower at 150 N. Michigan Ave. It sold early this year for $60 million, just under half the previous sale price in 2017.
Buyers at reduced price levels are betting their investments leave enough room to make upgrades, fund new leases and still have room for sizable profits.
Beacon and Allianz declined to comment to CoStar News. The seller did not immediately respond to a request to comment.
Completed in 1982, the tower was designed by Kohn Pedersen Fox Associates. Its tinted glass reflects the water, sky and nearby high-rises on sunny days, making it a focal point on architecture boat cruises.
Beacon’s deal to buy back the building, first reported by Crain’s Chicago Business, comes with the property due for $36 million in renovations, according to a marketing brochure from brokerage Cushman & Wakefield.
That commitment was part of a long-term lease extension by the tenant whose name is atop the tower, investment manager Nuveen.
Planned improvements include upgrades to lobbies and the fitness center, a new restaurant-cafe, and a new exterior deck, tenant lounge and conference center at the top of the building. That follows more than $24 million in renovations already made to the building since 2018, according to the brochure that also says occupancy is set to fall from 78% to below 73% with upcoming lease expirations.
Nuveen’s new deal is for 165,000 square feet leased through 2037, with Nuveen committing to pay $450 per square foot toward renovating its space, according to the Cushman & Wakefield materials. That is a reduction from almost 180,000 square feet previously on a lease that had been set to expire next year, according to CoStar data.
The Wacker Drive tower also a parking garage with 102 covered spaces.
For the Record
The seller is represented by Cushman & Wakefield brokers Cody Hundertmark, Tom Sitz and Dan Deuter.