John Buck Company Secures Chicago Office Loan Modification

The John Buck Company has secured a loan modification for its 38-story office tower in Chicago’s Central Loop.

The local developer reached a deal with German lender Aareal Capital to restructure a $58.4 million mortgage on its art deco tower at 33 North LaSalle Street, Crain’s reported.

The loan modification split the mortgage into two parts: one that reduces the principal debt to about $33 million, and another segment, a “hope note,” worth $22.7 million, which will only be repaid if the building hits specific performance milestones.

Aareal Capital has agreed to fund up to $24.2 million for leasing costs to help enhance the building’s competitiveness, including commissions and office buildouts.

The restructuring provides an opportunity for the firm to attract tenants and stabilize the building over a five-year period, said Will Press, vice president of investments at John Buck.

Buck purchased the 403,000-square-foot tower in 2014 for $32.8 million, or $81 per square foot. Since then, Buck has invested heavily in upgrades, including the addition of a conference center and improvements to the elevators.

However, the nearly century-old tower has struggled to maintain a strong tenant base in recent years. It was 75 percent leased in 2022. Today, that amount has dropped to just 40 percent.

Elevated vacancies have become a major challenge for many office landlords in Chicago. The vacancy rate in downtown Chicago was 26.3 percent in the fourth quarter, more than double the 13.8 percent rate recorded at the start of the pandemic, according to CBRE.

The property is about a block away from the James R. Thompson Center, the site of Google’s future Midwest headquarters.

Buck has enlisted Chicago leasing agency Madison Rose to market the North LaSalle Street tower to prospective tenants.

— Andrew Terrell