A San Francisco-based real estate investor is looking to sell a historic office building with a high vacancy rate in Chicago’s Loop business district after taking recent losses on high-profile buildings in other cities.
Shorenstein Properties has hired JLL brokers to seek a buyer for the 16-story building at 1 N. State St., which is more than 58% vacant, according to a marketing brochure. The offering does not include separately owned retail space on the lower two floors of the tower that was completed in 1912.
It's a challenging time for deals around the country: Shorenstein in December not only sold the third-tallest building in Los Angeles, the Aon Center, for $153.5 million, far below the $268.5 million it paid in 2014, it recently handed the second-tallest building in Minneapolis, Capella Tower, back to its lender after failing to sell the property and pay off its loan from a $225 million purchase in 2018. Shorenstein also faces a potential loss on the smaller tower it bought in Chicago for nearly $80 million in 2016.
Amid historically low demand for office space, higher interest rates, a dearth of debt for office deals and other factors weighing down the sector, Chicago sales have included deals for the 41-story tower at 150 N. Michigan Ave. and the office portion of 20 W. Kinzie St. at prices far below the previous amount of debt on the properties.
Shorenstein declined to comment to CoStar News.
JLL brokers are seeking a buyer willing to take on a major leasing challenge, with large blocks of the 560,735-square-foot property vacant. JLL’s materials emphasize Shorenstein’s $36.5 million in upgrades since buying the building, including a recently completed Town Hall tenant lounge and a rooftop deck.
Shorenstein financed the purchase of One North State with a $68.15 million loan from U.S. Bank, according to Cook County property records. That loan has been modified five times, with the most recent change in April 2023 requiring the borrower to pay down the principal to $35.75 million, according to online property records.
Just over 41% of the space is leased, with a weighted average lease term of 4.1 years, according to JLL, and the property is expected to sell for far less than it would cost to build today.
Historic buildings in the center of the Loop in recent years have lost major tenants to trophy towers along the Chicago River and farther west in Fulton Market. The longtime financial center has been boosted recently by Google’s plans to renovate, own and occupy the glassy James R. Thompson Center and JPMorgan Chase’s announcement that it will overhaul and stay in its 60-story namesake tower after considering anchoring a new development.
For the Record
The seller is represented by JLL brokers Jaime Fink, Bruce Miller, Patrick Shields, Sam DiFrancesca and John Mason.