State Street office building heading to auction block

Rampante Realty defaulted on $47.8 million loan

Deutsche Bank's Christian Sewing; 401 South State Street, Chicago (Deutsche Bank, Google Map
Deutsche Bank's Christian Sewing; 401 South State Street, Chicago (Deutsche Bank, Google Map

After a foreclosure and two failed attempts at a sale, the future of a vacant Loop landmark will be up to the highest bidder.

The historic office building at 401 South State Street was the subject of a foreclosure suit in 2020 for alleged nonpayment on a $47.8 million loan, allowing lender Deutsche Bank Trust to take ownership. Once home to Robert Morris University, which leased 355,000 square feet from 1996 through March 2020 out of property’s 490,000 total square feet, the building is scheduled to be sold in a Cook County Sheriff’s auction Jan. 17.

Before handing over the keys to Deutsche Bank, owner Rampante Realty hired JLL’s Chicago office to market the eight-story building for sale after Robert Morris moved out at the end of March 2020. JLL marketing materials framed the asset as an opportunity for a fresh start that could be reconfigured to tailor to tenant needs in a post-pandemic world. It’s not clear what became of efforts to sell the property, and attorneys for Deutsche Bank and Tampa-based Rampante didn’t return requests for comment.

While the building’s vintage facade is unique, its position as a building struggling amid the Chicago Loop’s depressed office market isn’t. The asset class took a hit from the pandemic and rising interest rates, and recovery has been slow. The downtown office market saw its lowest quarterly leasing performance of 2022 in the fourth quarter, with 1.7 million square feet transacted, according to a report from Savills.

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Rampante first tried to sell the State Street building for $100 million in 2019, when it was 75 percent occupied. The firm bought it for $68.1 million in 2016. The building was most recently appraised at $76.5 million in May 2016, according to ratings agency DBRS Morningstar.

Another downtown building headed to the auction block this month is the Hilton Chicago Magnificent Mile Suites at 198 East Delaware Place in the Gold Coast, which also fell into foreclosure in 2020.

While the downtown location might boost the State Street asset’s chances of preserving some value, other offices in the Chicago area facing large blocks of vacancy haven’t fared well in auctions as of late.

Two empty suburban assets recently sold via private auctions resulted in massive losses for investment firms. Phoenix-based Orion Office sold a 197,300-square-foot Northbrook office building to an unnamed buyer for about $2.5 million down from the more than $44 million Orion paid for the property in 2011. And in Schaumburg, the firm LXP sold a 280,000-square-foot building for $7 million to a California tech firm, after putting $30 million into building renovations and tenant buildouts since 2013.

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