Kohan Buys Chicago Trophy Office at Massive Discount

Kohan Retail Investment Group closed on its purchase of 311 South Wacker Drive at a price showing just how far downtown Chicago office values have fallen.

The New York-based firm, best known for acquiring distressed malls, paid close to $45 million for the 1.3 million-square-foot tower, Crain’s reported. The price marks an 85 percent drop from the $302 million Zeller Realty Group and Cindat Capital paid in 2014. The deal pencils out to about $35 per square foot.

Kohan secured $20 million in financing from Great Neck, New York-based Hakimian Capital for the acquisition. JLL’s Jaime Fink, Bruce Miller, Patrick Shields and Sam DiFrancesca brokered the transaction.

The sale is one of the biggest losses on record for a trophy office property in the city, part of a broader trend of deep-discount deals reshaping the Loop.

Kohan CEO Mike Kohan said he plans to lease up the building while maintaining it as offices, pitching prospective tenants on below-market rents made possible by the steeply reduced basis.

“You cannot say that the office business is completely shot,” Kohan told the outlet. “There are always ways you can get business, ways you can lease stuff.”

The building is on track to be more than half-empty once law firm Smith Gambrell & Russell exits later this year. That’s a dramatic reversal from its 86 percent occupancy rate in early 2020.

Zeller and Cindat spent $38 million on capital improvements during their ownership and refinanced the tower in 2018 with $295 million in debt, a package that included an $80 million mezzanine loan from TIAA. All that equity and debt was effectively wiped out in the sale.

The tower’s path to sale was riddled with failed deals. A $70 million offer from developers John Murphy and Gerald Kostelny fell apart earlier this year, following a scuttled $300 million offer from D.C.-area firm Firenze Group in 2022. Murphy had previously floated ideas ranging from partial conversions to full demolition and redevelopment, in partnership with Hines.

Despite past flirtations with adaptive reuse, Kohan said his firm has no immediate plans to convert the property, unlike its recent play to reposition a newly acquired Midtown Manhattan office tower into housing. The firm is “still getting our hands around” the plan for 311 South Wacker, he said.

— Judah Duke