601W, David Werner Score Chicago Office Bargain

601W and investor David Werner aren’t letting Chicago’s office headwinds push them away.

A joint venture between the New York-based office landlord and David Werner Real Estate Investments landed a $62.5 million loan from Northwind Group to buy 303 East Wacker just before the New Year. The deal was structured with an advance of $32.5 million and $30 million set aside for future costs related to leasing up the building, according to a news release from New York-based Northwind. The price pencils out to $34 per square foot.

Northwind Group founder Ran Eliasaf said he is confident the 944,000-square-foot building will perform well and attract more tenants because it already has a solid roster of longterm leases and has recently undergone significant renovations.

“We think two or three years from now, we’re going to see a much stronger office market,” he said of Chicago.

Eliasaf also pointed to Northwind’s previous work with the same borrowers, including a $60 million bridge loan issued to 601W for an office building at 801 South Canal Street.

“For us to work with repeat sponsors is always easier. We know each other,” he said.

The sale represents a major plunge in value for the 30-story property, which last sold for $182 million ($193 per square foot) in 2018. Former owner Beacon Capital Partners took out a $156 million loan from Bank of America to finance the purchase and ultimately handed the keys over to the lender via deed-in-lieu of foreclosure, setting up the venture of Werner and 601W to take over. Additional details of the transaction have not been recorded in public records yet.

Beacon’s struggles with the 75 percent occupied building reflected a broader trend in Chicago as many companies downsized in the wake of the pandemic.

But as a steady stream of office foreclosures made headlines in 2024, some signs of hope began to percolate toward the end of the year. Leasing activity reached 9.1 million square feet by the end of the year, which was the highest leasing volume recorded since the beginning of the pandemic in 2020, according to Savill’s. That’s why the buyers decided to take a chance on the heavily discounted building, even as Werner faces financial troubles at 300 South Riverside Plaza, and 601W fights off lenders at the Civic Opera House, One South Wacker and the Aon Center.

Beacon has also been a buyer of devalued Chicago offices. It bought 333 West Wacker Drive for $125 million last year, a steep discount from its last sale of over $300 million, in a bet the building’s appraisal will make a comeback.