Neil Bluhm faces potential loss in sale of Michigan Ave office tower

Billionaire Neil Bluhm is facing a significant loss on a 35-story office tower in Chicago’s Streeterville neighborhood, highlighting broader challenges in the city’s real estate market.

Bluhm’s firm, Walton Street Capital, is preparing to sell the 811,000-square-foot office building at 401 North Michigan Avenue. However, the expected sale price may not be enough to cover a $160 million loan from ING, CoStar reported. 

Even with the building’s reported 90 percent occupancy rate and prime location near the Tribune Tower and across from the Wrigley Building, the market challenges are tough.

Walton Street purchased the building in 2017 for $360 million, or $443 per square foot. It sold the retail spaces in 2019 for $90 million and refinanced the office portion with the $160 million ($197 per square foot). JLL is marketing the property. Constructed in 1965, it is known as the Equitable Building. 

The situation mirrors the broader trend of properties selling for less than their previous values due to rising borrowing costs and decreased demand for office space. 

For instance, Beacon Capital Partners recently purchased the 36-story tower at 333 West Wacker Drive for $125 million ($144 per square foot), well below its 2015 sale price of $320.5 million ($369 per square foot).

Bluhm’s firm, JBM Realty recently secured a $180 million loan to refinance the 900 North Michigan Shops, including office space in a 66-story tower. The refinancing required an additional $56.4 million in equity, reflecting the financial pressures on major real estate investments.

Read more

Commercial

Los Angeles

Greenlaw, Walton Street lose Orange office tower to TPG after $64M default

Commercial

Chicago

JMB Realty lands $180M refi for vintage skyscraper that’s 89% leased

Commercial

Chicago

Chicago buyer for Woodland Hills manufacturing complex

In response to these shifting market dynamics, some developers are exploring alternative uses for office spaces. For example, a Connecticut-based developer is considering converting a 24-story office tower at 500 North Michigan Avenue into apartments to meet the growing demand for housing, providing a potential solution for underperforming commercial properties.

The anticipated sale of Bluhm’s 35-story office tower serves as a critical indicator for the future of Chicago’s office market. As Walton Street braces for a potential loss on this property, the sale’s outcome could signal the market’s direction and influence other property owners’ strategies in the city. 

— Andrew Terrell