Chicago office tower sells at an 87% discount to pre-Covid-19 price

[CHICAGO] A Chicago office tower sold for roughly 87 per cent less than its pre-pandemic price tag, marking another example of the precipitous drop in commercial-property values in the third-largest US city.

A joint venture between New York-based 601W Companies and David Werner Real Estate Investments purchased the 22-storey building at 175 W Jackson Blvd for US$41 million, according to a source with knowledge of the deal. The seller, Brookfield Asset Management, paid US$306 million for the tower in 2018.

Brookfield’s lender filed a foreclosure lawsuit on its US$280 million loan on the property in 2022, according to public records. The vacancy rate at the 1.4 million-square-foot (130,000-square-metre) building is roughly 53 per cent, data from CoStar Group show.

Representatives for the buyers and Brookfield did not immediately respond to requests for comment on the transaction.

Office values nationwide have been slow to recover from the pandemic, but Chicago has been hit especially hard. The city’s office vacancy rate climbed to about 27 per cent in the fourth quarter, according to data from brokerage Cushman & Wakefield.

Northwind Group provided a US$58.5 million loan for the joint venture’s purchase, according to a statement. That included a US$33.5 million initial advance at closing and US$25 million to fund future leasing initiatives, Northwind said.

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“We are seeing Chicago recover from a very tough environment and we are seeing leasing volumes increase,” Northwind founder Ran Eliasaf said. “There’s still a way to go, but the city is definitely at a general positive momentum.”

The building at 175 W Jackson takes up an entire city block in the southern portion of the Loop, Chicago’s downtown. The purchase adds to 601W’s real estate holdings in the city, where it also acquired the 83-storey Aon Center and the Old Post Office building in recent years. BLOOMBERG