A historic office building in Chicago that was recently handed back to its lender has gone up for sale using a formula that has become increasingly common in a challenging market: new debt provided by the seller.
JLL brokers have been hired to seek a buyer for the 12-story building at 209 W. Jackson Blvd., less than two months after previous owner Market Street Real Estate Partners walked away from its investment in the property in the Loop business district.
Miami-based Market Street gave up the property via a deed in lieu of foreclosure last month, allowing lender ACRES Capital to take ownership without having to formally foreclose, CoStar News recently reported.
It is among several recent examples of Chicago office buildings either going into foreclosure, being handed back to the lender or being sold at a steep discount to the last sale price, including properties such as the Civic Opera Building, the Chicago Board of Trade Building, the 22-story tower at 175 W. Jackson Blvd., the 41-story tower at 150 N. Michigan Ave., and the 35-story tower at 300 S. Wacker Drive.
In many of those cases, as well as with an office complex in west suburban Oak Brook, Illinois, lenders have looked to reduce their losses on loans made before COVID-19 by offering buyers the chance to assume an existing loan or by providing a new loan.
That is a way to offset rising interest rates and the difficulty in obtaining debt and equity for office deals throughout the country amid poor demand for corporate space.
Market Street refinanced the building at 209 W. Jackson with a $25 million loan from an affiliate of Uniondale, New York-based ACRES less than four years ago, according to Cook County property records.
It’s unclear how much the loan balance was when it was handed back to the lender, and ARES did not immediately respond to a request for comment.
But “attractive seller financing” is available to the next owner, according to JLL materials marketing the property, which do not specify the potential loan terms.
The approximately 143,000-square-foot building, completed in 1896, is about 34% leased with a weighted average lease term of 4.4 years, according to JLL.
Because the building is recognized by the National Register of Historic Places, a new owner could reap benefits of historic tax credits and Class L tax incentives, which would help in re-leasing the building or converting it to another use such as apartments, according to JLL.
Underlying zoning would allow for an as-of-right conversion of the building to 206 apartments that, because it’s an existing building, would not be required to offer any units with affordable rents, according to JLL.
Ground-floor retail tenants are Starbucks, Panda Express and Luke’s Homemade Italian Beef.
An office-to-residential project is already in the works for another Chicago office building that ACRES sold at a discount to the previous owner’s debt.
After buying a 24-story building at 65 E. Wacker Place last year, Rochester, New York-based Intersection Realty Group said it planned to convert much of the building to apartments, while keeping a two-level Morton’s steakhouse at the base and some office space.
ACRES took back that building after an Irish investor defaulted on its loan and also gave up its ownership by deed in lieu of foreclosure.
For the Record
The seller is represented by JLL brokers Sam DiFrancesca, Patrick Shields, Jaime Fink and Bruce Miller.