Bixby, Franklin near purchase of Alter’s struggling River North office space

A River North office property is poised to change hands at a steep discount, prolonging a troubling trend in the Windy City. The potential deal would also give one of the new owners full control of the building as it already owns the hotel portion.

Bixby Bridge Capital and Franklin Partners are in line to buy the office portion of the 17-story building at 20 West Kinzie Street, CoStar reported. Northbrook-based Bixby currently owns the  Kinzie Hotel across the first six floors of the building.

The deal has not been finalized and it could fall apart entirely as high interest rates, tough lending standards and other challenges remain a factor. 

Although terms of the sale have not been disclosed, sources familiar with the deal expect it to sell for far less than the $60 million loan on the property, obtained by the seller, Alter Group, in 2019 from Bank of America. 

If that happens, it would be one of many Chicago offices to trade for a staggeringly low amount amid the remote-work movement, which has triggered record-high office vacancies in 11 of the last 13 quarters.

In January, Igor Gabal paid just $4 million for the 240,000-square-foot downtown building at 300 West Adams Street, equating to a 90 percent drop from its $38 million appraisal in 2012.

In another example of startling depreciation, the 17-story River North building at 213 West Institute Place sold for $17 million in December. That’s less than a third of what the seller, KBS Growth & Income REIT, paid in 2017.

At 20 West Kinzie, the Bixby-Franklin venture aims to revitalize the office space, potentially enhancing amenities for both hotel guests and office tenants. 

Apart from broader market challenges, the building’s drop in value can be attributed to the loss of its largest tenant, WeWork. The coworking firm’s departure has contributed to an overall vacancy rate of 80 percent at the site, the outlet reported.

—Quinn Donoghue