Blackstone, New York Life List Distressed Chicago Office Assets

Investors willing to brave Chicago’s troubled office market have two new options to buy downtown properties at a bargain.

CBRE brokers have been hired to sell the 517,500-square-foot building at 444 North Michigan Avenue as part of a “lender directed sale” on behalf of New York-based Blackstone, a private equity firm that’s overseeing the $123 million loan on the property that matured in March, Crain’s reported.

An asking price hasn’t been disclosed, but offers are expected to hover around $66 million, a fraction of what it last sold for, the outlet reported, citing Real Estate Alert.

Separately, New York Life Insurance has hired JLL to market a $56.6 million nonperforming loan tied to the 250,000-square-foot Inland Steel Building at 30 West Monroe Street, which has been owned by New York-based Capital Properties since 2007.

The beleaguered state of the properties reflects the mountain office distress in Chicago. Persisting remote-work trends continue to drive up vacancies to historic highs, and tough lending standards have made it tough for landlords to refinance their assets.

The 444 North Michigan building was purchased by a joint venture of Los Angeles-based CIM Group and Chicago-based Golub & Company for $138 million in 2018. The venture refinanced the property with a $123 million loan that was originally slated to mature in January, but it scored an extension through March. The loan had been watchlisted in January, although the balance has been paid down to about $95 million.

Despite investing $11 million on upgrades to the 36-story building since 2020, it’s just 64 percent leased, down from the city average of about 75 percent. That’s also a considerable drop from the 86 percent occupancy rate when the Golub-CIM venture bought the building.

As for the landmark Inland Steel Building, a sale would wipe out a huge chunk of equity for Capital Properties, which refinanced the property with a $60 million loan in 2016, nine years after buying it for $57 million.

Capital Properties tried selling the 19-story building in 2019, when it was 84 percent leased, with hopes of selling it for about $88 million. Now, the property is 61 percent leased. An asking price wasn’t disclosed, but the remaining debt balance is 42 percent less than the building’s appraised value from 2016, according to the brokerage. The loan is set to mature in December 2026.

—Quinn Donoghue