Transwestern puts River North office lofts back on market after broken deal

Investment arm of Texas-based brokerage paid $2.7M last year to extend loan on 225 W. Ohio St. as it looks for another buyer amid a tough market for similar assets

Buyers, Sellers Opting Off Market
Transwestern CEO Larry Heard and 225 West Ohio Street (Transwestern)

Transwestern is trying again in Chicago’s River North.

The investment arm of the Texas-based commercial real estate brokerage is marketing its loft offices at 225 West Ohio Street for sale after the firm had a deal to sell the property that recently fell apart.

The 50,000-square-foot building was listed again after Transwestern paid down $2.7 million to its lender last year to extend the building’s $9.4 million debt another year as interest rate hikes diminished the investment sales market.

The property in the heart of River North was under contract with a buyer a few months ago, but the deal fell through, CBRE Group’s Dominic Soltero, the property’s listing agent, said. He didn’t say who the buyer that backed out was.

“It’s hard for buyers to get committed to a deal right now. The market’s just really fluid, there’s a lot of uncertainty,” Soltero said in an interview. “It had nothing to do with the building.”

Five of the building’s six floors are currently occupied, many of them by long-term tenants, with the top floor and one small unit on the third floor available for lease, he said. Soltero called this a unique “value add” play for potential investors in his marketing materials.

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“A lot of buildings out there are hovering around 60 percent [leased] or lower. This one’s performing very well. It is an outlier right now,” Soltero said. “Unfortunately, it’s just tough.”

The fund with which Transwestern bought the building is nearing the end of its life and the investor has chosen to sell rather than carry the property into a new fund, Soltero said.

There’s no asking price listed on public marketing materials, and it’s unclear if Transwestern will get its investment into the property out of a sale. The firm bought the building for $13.3 million back in 2015. In 2020, the building’s mortgage was refinanced with a $9.4 million loan from Associated Bank, according to Cook County property records.

“The loan’s not a problem. There’s no issue with regards to sale and what we’re trying to achieve as far as value goes,” he said, before declining to comment further.

The loan was set to reach maturity early last year, but was modified to extend it for an additional year; the new maturity was earlier this year. As part of this extension, Transwestern agreed to shell out just less than 30 percent of the total loan balance, according to the records.

While Soltero said the River North building stands out with its high occupancy, it is on-trend for the financing challenges hitting Chicago’s loft office market lately. Last month, an affiliate of Truist Financial Corp. decided to cut its losses on three Heitman-owned West Loop office buildings it loaned $42 million against, moving to sell the debt even if it means only recouping less than its investment.

This is the reality for an increasing number of borrowers and lenders who made bets on mid-market offices before the pandemic and are now feeling the effects of a difficult market, partly due to the rise in remote work.

But Soltero said finances are not an issue for the 225 West Ohio Street property, which boasts a high occupancy rate, loyal tenants and prime location.

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