Blackstone in talks with lenders on maturing Chicago office loan

BLACKSTONE is in discussions with lenders on a US$310 million mortgage backed by a struggling Chicago office tower.

The commercial mortgage-backed security on the property, 350 North Orleans, was transferred to special servicing ahead of its July maturity, according to Kroll Bond Rating Agency. Payments on the non-recourse loan are current, KBRA said in a report on Monday (May 22).

Blackstone “effectively” wrote down its investment in the tower, in the River North neighbourhood, to zero last year, said Jillian Kary, a spokesperson for the firm.

“The property is experiencing the well-known headwinds facing US traditional office buildings lacking first-class, modern amenities,” Kary said. “This location in the River North submarket has been particularly challenging.”

KBRA has downgraded ratings on the loan, citing weaker performance from falling occupancy at the 1.3 million-square-foot (121,000-square-metre) tower.

The property was built in the 1970s and has undergone various renovations, including one that was completed in 2018. Blackstone bought the building, previously known as River Point North, in 2015.

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Office-loan defaults have been ticking up, with landlords struggling to make payments as borrowing costs soar and tenant demand sinks. Brookfield and a Pacific Investment Management office landlord are among the major institutional owners that have defaulted on large office mortgages this year.

US traditional office represents less than 2 per cent of Blackstone’s global portfolio, Kary said. BLOOMBERG