FRI Investors is set to make its debut in the local office market with the acquisition of a distressed and deeply discounted office tower in the Loop.
The Florida-based firm, led by CEO Michael McCloskey, is nearing a deal to purchase the 57-story building at 70 West Madison Street for just under $100 million, or about $70 per square foot, Crain’s reported.
The sale would mark a 73 percent discount from the $375 million price the 1.4 million-square-foot tower commanded in 2014. CBRE’s Blake Johnson and David Knapp are representing the sellers, a joint venture of Hearn, GEM Realty Capital and Farallon Capital Management.
The building, which was 90 percent leased in 2014, is now only 68 percent occupied, according to CBRE. Its largest tenant is CIBC, which occupies more than 116,000 square feet. It was built in 1981 and is one of the tallest buildings in Chicago.
Financing challenges could still derail the transaction, the outlet reported.
If the deal closes, it likely would resolve Bank of America’s $276 million foreclosure lawsuit against the landlords. The lawsuit followed a missed payment on a $305 million loan issued in 2018.
The deal highlights the severe difficulties facing downtown office landlords in Chicago.
The shift to remote work and rising interest rates have led to plummeting property values, along with foreclosures and distressed sales. Similar sales include those of the office towers at 333 West Wacker Drive and 230 West Monroe Street, which sold for significantly less than their pre-pandemic values.
Despite these difficulties, the potential sale shows the market that investors like FRI are still interested in betting on downtown Chicago’s recovery, particularly as companies like Google and JPMorgan Chase make substantial commitments to office space in the area.
While FRI’s plans for the property remain unclear, the building’s low price could allow the firm to invest in updates to the building and fund tenant improvements. FRI typically operates in mid-sized markets in the southeastern U.S.
— Andrew Terrell