Shapack Partners Venture Refinances Fulton Market Office Asset

A Shapack Partners-led venture secured a $247 million refinancing for the largest office building in Fulton Market, in a rare win for downtown office owners.

The firm’s joint venture with Focus Development and Walton Street Capital is set to close this month on a five-year, interest-only loan backed by 167 North Green Street, according to a presale report from ratings agency KBRA Crain’s cited. The deal will pay off a $232 million Deutsche Bank loan from 2021, giving the group breathing room until interest rates settle and the office market stabilizes. The refinancing amounts to $387 per square foot.

The 17-story, 638,800-square-foot property stands out in a market struggling with remote-work headwinds and a surge in distressed debt. The building is nearly 92 percent leased compared to 73 percent for downtown Chicago overall. It was recently appraised at $370 million, or $570 per square foot, according to KBRA.

The loan will be packaged into a CMBS offering, making performance data publicly available. The previous loan wasn’t set to mature until next year, but the owners opted to refinance early and lock in financing despite an interest rate of about 6.7 percent, a source told Crain’s.

Tenants include CCC Intelligent Solutions, which leases more than 140,000 square feet through 2037. MoLo Solutions signed for roughly 94,000 square feet through 2034 but is now marketing the space for sublease. WeWork still occupies over 93,000 square feet, keeping its lease intact after filing for bankruptcy in 2023. Virginia-based consulting firm Guidehouse subleased nearly 47,000 square feet in the building from Kroll in February.

The building generated $27.7 million in net operating income on $42.6 million in revenue last year, according to KBRA. The developers paid $340 million to build the property, which pencils out to $532 per square foot.

Shapack and partners tried to sell the building in early 2022, hoping to fetch a price well above cost, but rising interest rates and shrinking buyer appetite put those plans on ice.

Fulton Market is a bright spot amid broader market turmoil, attracting tenants and lenders alike with its slate of upscale hotels, apartments and office towers. Shapack is also behind the Hoxton and Soho House hotels, the Parker Fulton Market apartments and a 29-story resi development at 220 North Ada Street.

— Judah Duke