BofA Tower gets Chicago’s biggest mortgage bond deal since Covid

[NEW YORK] A mortgage loan for Chicago’s Bank of America (BOA) Tower is being refinanced with US$700 million in bonds, a rare bright spot for the city’s beaten-down real estate market, according to people familiar with the matter. 

The refinancing signals bond investors still have appetite for deals involving higher quality buildings with more amenities. The mortgage bonds’ sale is the largest of its kind in Chicago since the pandemic, said the people, who asked not to be named discussing private negotiations. 

The Chicago office market has been a sore spot for investors after Covid-19 hollowed out the downtown. Demand for offices in cities like New York has started to rebound, but Chicago is still struggling with empty towers. The city’s vacancy rate climbed to a record 26.5 per cent in the third quarter, according to data from real estate broker CBRE. 

Still, trophy buildings like the BOA Tower have managed to lure tenants. The property on 110 North Wacker Drive is near two of the city’s main transport hubs: Union Station and the Ogilvie Transportation Center. It’s also located on the Chicago River, with amenities including restaurants by Spanish-American Chef José Andrés.

The debt is being issued by real estate investors Oak Hill Advisors, Callahan Capital Partners and Affinius Capital, the people said. It also comes at a time when interest rates have dropped. Earlier this year, the Salesforce Tower in Chicago got a US$610 million refinancing. 

Proceeds from the BOA Tower bonds are being used to refinance a loan held by several banks, the people said.

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The market for office-backed commercial mortgage bond deals all but froze after the pandemic, eventually delivering once-unfathomable losses on AAA rated bond deals. But demand started heating up again about a year ago, with several deals backed by properties like Rockefeller Center and The Met Life Building in New York City.

The 57-story tower is currently 98 per cent leased, with BOA occupying 17 floors and accounting for about a third of the total rent, according to bond documents. The building is owned by a joint venture consisting of Callahan Capital Partners, Oak Hill Advisors and Affinius, the documents showed. BLOOMBERG