Pair Of Chicago Office Buildings Sell At Steep Discounts
Two Chicago office buildings traded hands in separate deals at the end of 2024 for huge discounts — a sign that while office transactions appear to be picking up, owners are taking significant haircuts to make deals happen.
A joint venture between 601W Cos. and David Werner Real Estate Investments secured a $62.5M loan from Northwind Group to buy 303 E. Wacker late last month in the larger of the two deals. The acquisition represents a plunge of about 66% in value for the office property, which last sold for $182M to Beacon Capital Partners in 2018.
The property on the Chicago River is about 75% occupied, and tenants have signed roughly 300K SF of new leases at the building since the pandemic.
Despite the challenges of the Chicago office market, Northwind believes the property's high occupancy, positive cash flow and leasing momentum position the building well, Northwind founder and Managing Partner Ran Eliasaf said in a press release.
“This transaction reflects Northwind's focus on financing strategically located properties backed by experienced sponsorship,” Eliasaf said. “The extremely low loan basis and the sponsors' established track record in the Chicago market further reinforce our confidence in this deal.”
In the West Loop, Brog Properties bought the mostly vacant 16-story office building at 550 W. Washington Blvd. late last month from a venture of New York-based Metropolitan Life Insurance for about $18.5M, according to Crain's Chicago Business.
The sale price was 83% less than the $111M that the MetLife venture paid for the building just west of the Ogilvie Transportation Center when it was almost fully leased in 2013.
The building is nearly 70% vacant after anchor tenant CME Group moved out in 2023. The 372K SF tower could drop to 11% leased if its largest tenant, S.C. Johnson, leaves its roughly 74K SF office when its lease expires in November, Crain's reported.
“The location is good, and we think the building is a high-quality building that just needs a little tender love,” Brog Managing Member Andrew Brog told Crain's.
High interest rates and pandemic fallout have dampened investor interest in the city's office sector, and a third-quarter office report from Colliers says “significant equity losses from office property transactions are expected to continue in the near term.”
But a positive trend was emerging, with the number of downtown office building sales ticking up each quarter since mid-2023. The report says the slight increase was a signal that office investment would recover in Chicago, albeit slowly.
