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Brookfield looks to sell Loop office building, dodge foreclosure
Firm defaulted on $280M loan on property
A Loop office building that’s buried under a mountain of debt is soon to hit the market, as its owner, Brookfield Asset Management, looks to avoid foreclosure.
A court-appointed receiver tapped JLL to market the 22-story, 1.4 million-square-foot building at 175 West Jackson Boulevard, Crain’s reported. Brookfield was hit with a foreclosure lawsuit roughly 10 months ago after allegedly defaulting on its $280 million loan on the property, marking the biggest case of distress for a downtown office building since the start of the pandemic.
It’s unclear how much the property will fetch in a sale, but it’s likely to sell for far less than the $306 million Brookfield paid for the site in 2018. Chicago’s office sector is still reeling from the pandemic-induced shift to remote work movement that has pummeled landlords across the city. Low demand for office space, compounded by high interest rates, banking failures and massive company layoffs, contributed to a record high vacancy rate last quarter of nearly 23 percent.
To make matters worse, a slew of loan maturities have come due in recent months, forcing landlords to sell their assets at a loss, hand the keys back to their lender or face foreclosure. A 41-story tower on Michigan Avenue, for instance, is under contract to sell for $70 million, equating to a massive loss for CBRE Investment Management, which paid $121 million for the site in 2017, plus another $35 million in renovations.
The building at 175 West Jackson is 59 percent leased and generated $9 million in net cash flow last year, the outlet reported. That’s about half the amount needed to cover its debt payment.
The property was appraised at $210 million in March 2022, which still wouldn’t be enough to pay off the loan if it sells for that amount. More recently, the building was valued at $170 million by KBRA Analytics.
Brookfield was staring at a November 2023 loan maturity and planned to surrender the property to special servicer LNR Partners, but the arrangement fell through, leading to foreclosure.
Now, however, LNR is overseeing the mortgage on behalf of bondholders. The firm is willing to modify the terms of the loan to help land a buyer.
JLL is seeking a buyer that still has faith in Chicago’s office sector. It’s playing up the idea of assuming Brookfield’s loan, allowing a buyer to invest more in upgrades and finding new tenants.
—Quinn Donoghue