Blue Star Lists Chicago Office Building Under Lender Pressure

Blue Star Properties is shopping one of its West Loop office buildings, but not entirely on its own terms.

The Chicago-based firm, led by developer Craig Golden, put the 10-story, 293,000-square-foot building at 328 South Jefferson Street on the market as it faces pressure from its lender, an affiliate of Wells Fargo, Crain’s reported.

Cushman & Wakefield is marketing the property, which Blue Star has owned since 2007, but there’s no formal asking price. County records show the bank holds a $24 million mortgage on the property.

The listing appears to be a clender-guided test of the market, a growing phenomenon in Chicago’s distressed office sector. Interest rates are elevated, and leasing demand is soft; lenders like Wells Fargo are nudging landlords to sell before loans mature and values fall further.

At 61 percent leased, the property is a prime example of the city’s post-pandemic office malaise, which has left landlords underwater and led to a wave of fire sales, debt workouts and foreclosures.

But while testing the market under duress, Blue Star is also circling another downtown office building just a few blocks away.

The firm is close to finalizing a discounted acquisition of the 26-story 2 North Riverside Plaza from the estate of late billionaire Sam Zell, in what would be a classic bottom-feeding play in a depressed office market. That building, only 54 percent leased, is expected to undergo a major renovation under Blue Star’s ownership.

The parallel moves reflect the ambidexterity of developers like Golden navigating a broken office market with both hands out: one to cut losses, the other to seize opportunity.

Blue Star, which also led the transformation of 125 South Clark into The National and helped launch the Salt Shed music venue, occupies space at 328 South Jefferson alongside its 26 other tenants. The building was renovated last year and built in 1928 as the Igoe Mercantile Exchange Building.

— Judah Duke