Brog Properties Scores Another Chicago Office Discount

California investor Andrew Brog has expanded his holdings in Chicago’s West Loop with the purchase of a distressed office building for $18.5 million in cash.

Los Angeles-based Brog Properties secured the 16-story building at 550 West Washington Boulevard for about $50 per square foot. The price is about 17 percent of the $111 million ($300 per square foot) that Metropolitan Life Insurance paid for it in 2013 when the property was nearly fully leased, Crain’s reported. The building spans 372,400 square feet.

The sale, facilitated by JLL brokers Bruce Miller, Jaime Fink, Pat Shields and Sam DiFrancesca, highlights the challenges faced by office landlords in Chicago’s central business district, including a 25.8 percent vacancy rate, reduced investor interest caused by remote work trends and elevated interest rates.

That has triggered foreclosures and financial losses for many landlords, but Brog views the downturn as an opportunity for long-term gains. Furthermore, his debt-free purchase allows him flexibility that many other landlords lack.

Brog also purchased a 10-story office building at 216 West Jackson Boulevard in April for $2.5 million, an 89 percent discount from its 2012 sale price.

The building is approximately 70 percent vacant, with its largest tenant, S.C. Johnson, potentially vacating nearly 74,000 square feet when its lease expires in November.

To attract tenants, Brog plans to invest in building improvements, including upgrades to the gym, conference center and the addition of a tenant lounge.

“Our plan is to do turnkey deals,” he said. “The infrastructure in this building is as good as any building out there, and the location is as good as any location out there.”

Metropolitan Life’s decision to sell at a loss rather than reinvest is a strategy echoed by other distressed landlords in downtown Chicago. Similar losses were felt by Shorenstein Partners, which recently sold the 16-story office building at 1 North State Street for $13 million, an 84 percent drop from its 2016 purchase price. Additionally, CBRE Investment Management sold the 41-story tower at 150 North Michigan Avenue in 2023 to Matt Garrison’s R2 Companies for $60 million, half its 2017 value.

— Andrew Terrell