Blackstone Nearing Sixth Extension for Willis Tower Loan

Blackstone is on the brink of forging another loan maturity extension for the Willis Tower, after burning through the first five offered as part of the famous Chicago skyscraper’s $1.3 billion debt package.

The 110-story building’s landlord, Blackstone, wants to push out its loan’s due date, which is in March, at least one more time, to at least 2028 and potentially to 2030. It has proposed terms that have it close to a deal with a group of bondholders that control the loan, according to loan servicer data compiled by Morningstar Credit. The maturity would be rescheduled to 2028, with two one-year extension options to follow, according to a source familiar with the negotiations.

The loan was originated in 2018 and split up among groups of bondholders and financial institutions as part of a commercial mortgage-backed securities offering. Special servicer KeyBank started overseeing the loan this month.

“This extension reflects our continued belief in the strength of Willis Tower,” a Blackstone spokesperson told The Real Deal. The company touted its recent leasing performance as well as the popularity of its Skydeck attraction open to the public that serves as a major revenue generator for the property in addition to office rents. The spokesperson said the Skydeck has notched more than 1 million annual visitors.

Normally, commercial real estate debts moving into special servicing signal there’s financial trouble with the property. But this loan is expected to only be tagged with the dreaded label for a relatively short period, as Blackstone and KeyBank “have agreed to preliminary terms of a modification that would result in an extension of the loan,” according to loan servicer notes distributed by Morningstar.

What the landlord is offering the lender for its leniency isn’t clear. Blackstone representatives didn’t provide specifics and KeyBank said it was unable to comment. It’s possible the borrower would have to pay down a portion of the principal on the loan in order to secure the extension, as some lenders have required from other landlords with struggling but potentially salvageable office tower deals in need of more time to pay off loans.

However, the negotiations are playing out as the property’s financial performance is running ahead of some projections the landlord provided the lender. In the first nine months of last year, the property brought in nearly $188 million in revenue, well ahead of the $186 million for the full year underwritten as part of the debt deal, loan data shows. While data for all of last year isn’t yet publicly available, a Morningstar report confirmed the iconic Chicago office tower pulled in a full-year cash flow in excess of the underwritten $101.8 million with steady occupancy. The property brought in over $110 million in net cash flow in 2023, up from nearly $80 million in 2022.

The property was 83 percent leased as of September, above the downtown Chicago average of 75 percent. A spokesperson for the landlord emphasized it has scored 400,000 square feet of leases in the past 18 months, including a notable 84,000-square-foot deal with Adtalem Global Education, which is moving from a smaller space at 500 West Monroe Street.

Blackstone previously exercised extension options to avoid the pain of refinancing or selling while the office market has been battered by remote work trends and rising interest rates. But Blackstone President Jon Gray last month changed tune on the office market, claiming to sense the bottom is near and that a reacceleration within the sector could rapidly generate.

Blackstone bought the Chicago skyscraper — which was the world’s tallest from its completion in 1973 until 1998 — in 2015 for $1.3 billion. It took out the CMBS loan in 2018 to refinance, and embarked on a more than $500 million renovation project for the property that improved its food court and amenities accessible to the public and its tenants. The renovation wrapped up in 2022.