Portland Investor Snags Office Building For Big Discount, The First Loop Office Sale In More Than A Year
An Oregon investor bought a 29-story office tower in the West Loop, the first office building purchase in the Loop in more than 12 months.
Menashe Properties purchased the 623K SF building at 230 West Monroe St. for $45M, per a company press release. The company paid cash for the building, Crain’s Chicago Business reports.
The selling price is a stark drop-off in value since the property was last on the market. It sold in 2014 to Accesso Partners for $122M, per public records. The new price is less than half the amount of the $87.7M loan that Morgan Stanley provided Accesso in 2019 as part of a refinancing deal, according to Crain’s.
“The combination of Chicago’s vibrant corporate investment landscape, strong back-to-office culture, and the uniqueness of this deal has us incredibly bullish on the city, and specifically the West Loop submarket,” Menashe Properties CEO and principal Jordan Menashe said in the release.
The last major Loop-area office property to sell traded hands in July 2022 when Google bought the 1.2M SF James R. Thompson Center for $105M.
While the sale is a shot in the arm for the area’s moribund office market, it is also an ominous portent, representing a more than 60% discount to Accesso’s purchase price a decade ago.
Nearly a quarter of Chicago properties tied to commercial mortgage-backed securities are in some form of distress, the highest rate in the country, according to a Kroll Bond Rating Agency report released last week. CMBS performance is often used as a marker of market performance as a whole.
Yet JLL's second-quarter report offered some insight into Menashe Properties' optimism. The vacancy rate in the West Loop was 18.6%, below most of the submarkets in the city's central business district and less than the 20.7% average across the entire CBD, per JLL.
Net absorption in the West Loop paints a less rosy picture, however. Year-to-date negative net absorption in the West Loop has reached 255K SF. In contrast, the piping-hot Fulton Market submarket has seen net absorption of 360K SF.
Menashe largely owns properties on the West Coast, with a market presence in Portland, Vancouver, Seattle, Denver and Dallas.
The company was drawn to its first Chicago purchase because of the property’s cash flow and the opportunity to compete for tenants after its low-price purchase, its CEO told Crain’s.
“We're open for business,” Menashe said. “We are going to benefit from being a first mover. … Anybody that can make decisions and take care of tenants and customers is in a pretty good position right now.”
