Olayan Group in Talks to Buy Neil Bluhm’s Chicago Office Tower

The Olayan Group is negotiating a deal to buy a Magnificent Mile office building at a price well below its 2019 valuation.

The Saudi Arabian enterprise, led by CEO Hani Lazkani, is in advanced talks to acquire billionaire Neil Bluhm’s 35-story office tower at 401 North Michigan Avenue, CoStar reported, citing people familiar with the matter.

The transaction, if completed, would value the 811,000-square-foot property at between $120 million and $130 million ($148 to $160 per square foot), significantly less than the $160 million loan building owner Walton Street Capital secured on the building five years ago. JLL’s Jaime Fink, Bruce Miller, Sam DiFrancesca and Patrick Shields are representing Walton Street in the lease negotiations.

ING, the building’s lender, is expected to provide new financing for the transaction, taking a loss on the original loan. However, the agreement has yet to be finalized and could still fall apart.

The office tower occupies a prime location on Chicago’s iconic retail strip, adjacent to landmarks such as the Tribune Tower, the Apple flagship store and the Wrigley Building.

Walton Street purchased the property in 2017 for $360 million, which included retail space housing the Apple store. The retail portion was sold to Invesco in 2019 for $90 million, and the office tower was refinanced with the $160 million loan from ING.

Despite $17.2 million in capital investments since the purchase, the building is now slated to be sold at a steep discount, underscoring the broader challenges for the region’s commercial landlords, including declining demand for corporate space, sluggish leasing activity, and a 25.8 percent vacancy rate for the third quarter of 2024.

Olayan Group, known for its global real estate portfolio, has been capitalizing on declining property values in key markets. The firm owns high-profile assets such as the 550 Madison Avenue tower in New York and the Mandarin Oriental hotel in Barcelona.

If the deal closes, it would represent another instance of discounted office sales in the city.

Other deeply discounted transactions that are currently in the works in downtown Chicago include Glenstar and Patrick Halloran’s ongoing negotiations to acquire the 41-story office tower at 200 South Wacker Drive and 601W Companies plan to purchase 303 East Wacker Drive.

— Andrew Terrell