Mag Mile office building hits market, landlord staring down $80M debt

A New York investment group is looking to offload a downtown office tower to pay off its $80 million debt.

The 24-story, 336,500-square-foot building at 500 North Michigan Avenue is hitting the market, nearly two years after the owners first tried to sell it, CRE Direct reported.

The investment group bought the property for $86.4 million in 2017, when it was 62 percent leased, and refinanced it two years later with a $90 million loan from Granite Point Mortgage Trust. The owners used $20 million of that loan to renovate the retail space in the building.

An asking price has not been revealed, but it’s likely to sell for less than the $257 per square foot the investment group paid for it, prolonging a troubling trend. The remote-work era continues to drive up vacancies to record highs in Chicago, crushing property values and prompting landlords to either sell their assets at a loss, hand the keys back to their lender or undergo foreclosure proceedings.

Despite efforts to revitalize the site, 500 North Michigan’s occupancy rate stood at a dismal 34 percent at the end of last year, the outlet reported. The owners had planned to connect the building with the neighborhood retail complex, Shops at North Bridge, but that was never realized.

It’s possible that the property could linger on the market for a while given broader challenges facing commercial real estate, such as high interests and wary lenders, making it tough to finance acquisitions.

While there are various challenges stacked against Chicago’s office market, Granite Point remains open to providing financing to prospective buyers, Stephen Alpart, the mortgage REIT’s chief investment officer, told the outlet.

This approach aligns with Granite Point’s previous endeavors, such as facilitating the sale of the Paseo in Pasadena, California, where financing played a pivotal role in restructuring ownership.

Although Granite Point initially committed to lending up to $90 million against 500 North Michigan, only $80 million of the total was funded.

Editor’s note: This story has been updated to reflect that Samuel Schapira is not part of the ownership group of 500 North Michigan Avenue.

—Quinn Donoghue 

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