Bank of China selling off troubled $151M Wacker Drive office loan

Bank of China is looking for a lifeboat away from a sinking Loop office loan. 

The Chicago branch of the lender is seeking a buyer for a $151 million office debt issued to a venture of Manulife that owns the 40-story tower at 200 South Wacker Drive, according to JLL marketing materials. Manulife defaulted on the loan in the fall, a foreclosure lawsuit filed by Bank of China in October alleges. At the time the firm defaulted, Manulife had been trying to sell the property for about a year with no success, with JLL also leading the previous hunt for a buyer.

Trying to predict the outcome for struggling office buildings post-pandemic has become increasingly difficult. When 200 South Wacker was first listed on the market in late 2022, industry insiders expected it could sell for about $170 million, which would have amounted to a loss for Manulife but covered the loan balance. Now, the lender will likely sell off the loan for less than what’s left of the $151.3 million in principal.

It’s the latest listing to be added to a pile of distressed Chicago office loans on the market while lenders try to limit their exposure to the struggling commercial real estate sector as interest rate hikes over the last two years limit refinancing options.

If the Wacker Drive loan trades for less face value, the buyer will be getting a steep discount compared to what Manulife bought the building for just over 10 years ago.

Manulife purchased the building in 2013 for $215 million and then refinanced the 762,000-square-foot property with Bank of China for $163 million in 2019. Manulife also spent an additional $8.5 million on renovations to the building. It then chipped in $10 million to Bank of China in 2022 to reduce the balance of the loan to $151 million in order to extend the loan’s maturity date in hopes of finding an exit from the deal without a loss.

The bank’s approach is a sign that some lenders are done “extending and pretending” and trying to get out of the Loop — and the office sector in general — by offloading office loans before getting stuck with buildings via foreclosure.

Jaime Fink, Bruce Miller and Sean Ryan of JLL are brokering the loan sale. Fink declined to comment. Representatives of Manulife and Bank of China did not respond to requests for comment.

Despite a 28 percent vacancy rate, the brokers are highlighting the property’s variety of tenants — there’s 41 in all, none taking up more than 9.8 percent of the building’s rentable space — as a sign that a new buyer won’t be beholden to a few large tenants that could make or break the property’s success.

Like Bank of China, other lenders are done with holding out hope for office properties that will require costly turnarounds in order to pay off their current debt loads.

New York Life Insurance is working with JLL to market a $55 million non-performing office loan for the Inland Steel building at 30 West Monroe Street. The property is owned by Richard D. Cohen’s New York-based Capital Partners. And a Blackstone debt vehicle is moving to sell a loan it provided to a venture of Chicago-based Golub & Company and Los Angeles-based CIM Group for the office tower at 444 North Michigan Avenue.

Meanwhile, a $230 million Loop office loan is on the market, as well. It was issued by a group of banks led by Paris-based Societe Generale to the national postal service of South Korea for the 49-story office tower at 161 North Clark.

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