The owner of the Old Post Office is close to buying a Wacker Drive office tower off the discount rack, another extreme case of lost value in the vacancy-plagued downtown office market.
New York-based developer 601W is under contract to buy the 30-story office building at 303 E. Wacker Drive, according to sources familiar with the agreement. The pending purchase price was not immediately clear, but people familiar with the deal said 601W is negotiating to pay less than $70 per square foot, or close to $63 million, for the 943,581-square-foot tower overlooking the Chicago River.
If a sale is completed at close to that price — no guarantee, given many buyers’ struggle to secure financing today for office purchases — it would add to the list of office building sales downtown that have financially clobbered sellers over the past couple years. The COVID-19-fueled rise of remote work has combined with elevated interest rates to hammer office property values and leave landlords with few options to pay off maturing debt. The result: a Chicago central business district riddled with buildings in foreclosure and other types of financial distress.
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The sale of 303 E. Wacker would not only inflict financial pain on Boston-based owner Beacon Capital Partners, which bought the tower in 2018 for $182 million, but also leave Beacon’s lender with a substantial financial haircut. Beacon financed its 2018 purchase with a $156 million loan from Bank of America that is due to mature at the end of this month.
With that deadline imminent, Beacon and B of A put the property up for sale over the summer to see what investors would pay and how much value they could recover. The listing suggested B of A was interested in getting the devalued property off of its books rather than taking control of it through a foreclosure process or other means.
The discounted offering appears to have enticed 601W, which is poised to pick up a property that has performed relatively well amid an ugly office leasing landscape.
Beacon spent about $32 million on renovations and upgrades to the building during its ownership tenure, helping its cause at a time when companies are hunting for the newest and most-updated workspace they can find to help lure people to the office more regularly. Siding products manufacturer James Hardie moved its Chicago office to the building, and CNO Financial Group signed on after that.
But the property has also suffered some losses as competitor landlords have fought to shore up their tenant rosters. Engineering firm AECOM recently signed a lease to move its office to One Prudential Plaza from the 65,000 square feet it leases today at 303 E. Wacker.
The Wacker Drive tower was 77% leased as of early August — roughly on par with the average for downtown office buildings today — though that occupancy is set to drop to 66% with imminent move-outs,…
Read More: Old Post Office owner 601W nears deal for 303 E. Wacker
