Sterling Bay is seeking a buyer for its fully leased office tower at 311 West Monroe Street to head off a loan maturity that could otherwise push the property into distress.
The Chicago-based developer enlisted Eastdil Secured to market the 15-story, 390,000-square-foot building, Crain’s reported.
The move comes as Sterling Bay stares down an $82.5 million mortgage that was recently extended from last month to July. The debt is part of a CMBS package, making performance data publicly available, and highlights just how tight the squeeze has become.
Rising interest rates have ballooned its annual debt service to over $6 million, surpassing the building’s $4.3 million in net cash flow last year. The debt includes a $10 million guaranty, which would require Sterling Bay’s investment fund to cover any shortfall if the building sells below the loan balance or hits default.
Comparable office buildings in the Loop have sold for a fraction of their previous values. One block away, 200 South Wacker Drive traded for under $90 per square foot, well below the $211 per square foot balance on Sterling Bay’s loan.
Sterling Bay acquired 311 West Monroe for $60 million in 2017 and spent $43 million on renovations. It quickly leased the building to major tenants including West Monroe Partners, Mayer Brown and co-working and event space provider Convene. It refinanced at an appraised value of $169 million in 2020.
But the pandemic-era remote work shift and sharp interest rate hikes have left even leased properties underwater, as valuations collapse and refinancing options shrink.
A potential fire sale at 311 West Monroe would mark another blow for Sterling Bay, which recently surrendered part of Lincoln Yards to its lender and sold the former Groupon HQ for 83 percent less than it paid in 2018.
The largest tenants at 315 West Monroe are locked into leases through 2030 and 2032; it’s potentially still an attractive offer to any cash-rich buyer with enough confidence in the Loop’s recovery.
— Judah Duke
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