A downtown property that just hit the market could test Chicago’s ailing office sector and provide a clearer outlook for the year ahead.
An investment group led by Chicago-based Hearn has hired CBRE brokers David Knapp, Blake Johnson, Arthur Johnson and John Saletta to market the 57-story tower at 70 West Madison Street, CoStar reported.
It’s unclear what the Hearn venture is expecting to fetch in a sale, but it’s likely to trade for far less than the $375 million it paid in 2014, when Chicago’s office market was booming. It’s also likely to sell for less than the $305 million loan that Bank of America issued in 2018 as part of a refinancing deal.
The loan was used for various upgrades, including renovation of the lobby and adding fitness and conference centers. The updates were completed in early 2020, right before the pandemic delivered a gut punch to Chicago’s office sector.
The 1.44 million-square-foot tower is 68 percent leased, below the city average of nearly 76 percent. Stubborn remote-work trends continue to present challenges for office landlords, and that has been exacerbated in recent years by high interest rates and tough lending standards.
To evade foreclosure, many property owners are cutting their losses and selling assets at steep discounts. Earlier this week, R2 bought the 41-story office building at 150 North Michigan Avenue for nearly $60 million, roughly half of the $121 million that the seller paid for it in 2017.
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For the 70 West Madison building, CBRE brokers are highlighting the tower’s proximity to the James R. Thompson Center, which is set for redevelopment by Google.
It is unclear whether Bank of America will offer seller financing.
Key tenants include Canadian bank CIBC and law firms K&L Gates and Nixon Peabody. The property has a weighted average lease term of 5.4 years, the outlet reported.
—Quinn Donoghue