Chaim Simkowitz’s Guardian Realty lost a big tenant and then a bunch of value on a suburban Chicago office, even as United Airlines made a deal to buy it in a rare expansion of office space coming out of the pandemic.
United paid nearly $28 million for the 205,000-square-foot Northwest Crossings building at 1421 West Shure Drive in Arlington Heights, according to Cook County records. The sale equates to a $13 million loss in property value for Guardian, as the New York-based firm bought the northwest suburban site — formerly home to a Motorola division — for about $41 million in 2018.
Guardian, whose founder and CEO is Simkowitz, wasn’t available to comment.
United’s move to buy the property deal bucks the trend of companies ditching or shrinking their suburban office space, sometimes in moves to smaller spaces in the city. While office vacancy rates have soared to new heights in Chicago, its suburbs are faring worse amid lingering remote work trends and a tight lending climate, making it tougher for landlords to refinance their assets.
In 2021, United also bought the 200,000-square-foot property next door at 1501 West Shure for $56 million from Northbrook-based Torburn. The airline relocated hundreds of employees from its office in Blackstone’s Willis Tower downtown.
For Guardian, the sale followed some trouble popping up with its $28 million loan against the property it took out in 2018 from JP Morgan Chase, which securitized the debt and sold off the interest in it to investors in commercial mortgage–backed financial vehicles, making details of its performance public.
In 2021, the loan’s servicer, PNC Bank-owned Midland Loan Services, watchlisted the debt, typically a sign there’s a risk the lender won’t be repaid, according to credit ratings agency Morningstar. That followed the building’s biggest tenant at the time, financial services giant HSBC, abandoning its space in the building despite its lease running through March 2027.
HSBC had previously leased 80 percent of the property and its space was described by Midland as having “gone dark” in 2021 before a lease termination agreement was negotiated with Guardian last year. The loan wasn’t set to mature until 2028. Its balance was paid in full earlier this year, according to public records and Morningstar.
While sectors such as tech have cut back on office spaces as hybrid work schedules remain practical for some companies, plenty of jobs in the airline industry can’t be done remotely, meaning companies like United are still in the market for offices and taking advantage of discounts resulting from dropping demand and rising interest rates.
Guardian, meanwhile, is one of many suburban office landlords to have suffered a loss on its investment. In January, Bridge Investment Group sold the 490,000-square-foot Windy Point office campus in Schaumburg for $20 million, down from the $74 million it paid for the site in 2018.
Orion Office took a massive loss around the same time, when it traded a 197,300-square-foot office building in Northbrook for $2.5 million. That’s roughly $42 million less than what it paid for the property in 2011.
Read more
Commercial
Chicago
East Coast buyer takes on emptying suburban office at discount
Commercial
Chicago
Orion takes huge loss on Northbrook office sale
Commercial
Chicago
No pivot for Fulcrum: Tom Cox’s firm adds to suburban office holdings