Ivanhoé Cambridge Set to Take Big Hit with Chicago Office Sale

Canadian investment giant Ivanhoé Cambridge is getting ready to take a major haircut after putting its 31-story Chicago office tower at 125 South Wacker Drive on the market.

The Montreal-based firm, which is the real estate arm of the Caisse de dépôt et placement du Québec pension fund, bought the 576,800-square-foot tower in 2017 for $145 million.

It’s now expected to sell for just under $60 million, or around $100 per square foot, Crain’s reported, as remote work and rising interest rates continue to batter downtown Chicago’s office market.

The building, across from Willis Tower, was 80 percent leased when Ivanhoé acquired it and underwent $21 million in renovations. But today it’s only 64 percent leased, a figure soon to fall further as staffing firm Addison Group prepares to vacate 32,000 square feet. Cook County records show the property is debt-free, but the timing suggests broader recalibration by Ivanhoé, which has had its exposure to the downtrodden office market under scrutiny.

The sale adds to a wave of office landlords bailing out of Chicago’s Loop, including Sterling Bay and AEW Capital Management. And it reflects a bigger reckoning for Ivanhoé Cambridge, whose aggressive U.S. expansion in the 2010s left it vulnerable to today’s struggling commercial real estate sector.

The firm is juggling nearly $5 billion in loans maturing over the next year, including $1.125 billion on 3 Bryant Park and $1 billion on 1211 Sixth Avenue in New York. It landed a same-size refinancing for Bryant Park in February, but analysts have warned that other properties may not fare as well in today’s tighter lending environment.

Ivanhoé’s CEO Nathalie Palladitcheff has acknowledged the mounting pressure. “It’s not just about bad assets,” she told CNBC last year. “It’s also about bad liabilities. So when you have bad on both sides, it’s where the problem starts.”

JLL brokers Bruce Miller, Jaime Fink, Pat Shields and Sam DiFrancesca are marketing the Wacker Drive tower as a value-add opportunity with a diverse tenant base and several vacant floors facing Wacker. No occupant holds more than 3 percent of the space.

One tenant is now vertical farming startup Farm Zero, which recently signed a 5-year lease in the building, but its meager 9,000-square-foot space is a drop in the bucket.

Despite the sale, Ivanhoé remains a major office player in Chicago, with holdings including 444 West Lake Street, 515 North State Street and 10 and 120 South Riverside Plaza.

— Judah Duke