Next Realty Locks in Rare 25-Year Office Loan in Chicago

Next Realty just scored one of the longest-term office loans in Chicago in years, giving the landlord of a River North office building breathing room as others struggle to refinance or unload assets at a discount.

The Skokie-based firm landed an $11 million loan, tied to the Kingsbury Center at 350 West Hubbard Street, from StanCorp Financial Group, CEO Andrew Hochberg told CoStar News. The six-story, 135,000-square-foot building is 95 percent leased, with retail tenants CVS and Petco on the ground floor, and a roster of developers upstairs that includes Related Midwest, the Habitat Company, Oxford Capital and Bond Companies. Habitat also owns a stake in the property and manages it.

The 25-year debt deal stands out in a market where lenders have been pulling back on office, leaving many owners to sell at steep losses or hand property back to lenders. Next Realty knows the pain firsthand: earlier this year it sold 620 North LaSalle Street for less than half its loan balance.

The Kingsbury Center loan replaced a $13.3 million Nationwide Life note from 2015, but unlike many borrowers, Next paid down the balance enough to secure fresh cash. Instead of pocketing proceeds, the firm will reserve funds for leasing and tenant rollover, Hochberg said.

Properties in the River North area are also grabbing buyers in recent days, albeit at steep discounts. R2 purchased a six-story, 70,000-square-foot office property at 303 West Erie Street for $7.5 million last week, Crain’s reported. The seller, New York-based Alvarez & Marsal Property Investments, paid double that for the building in 2017.

The Kingsbury Center’s stability — a near-full roster of longterm tenants with an average tenure of 15 years — helped Next Realty lock in favorable terms. The loan’s interest rate resets every three years but runs through 2050, an unusually long commitment in today’s climate. By contrast, other recent Chicago office financings have been massive and high-profile: Blackstone secured a $1.3 billion CMBS extension on Willis Tower, while Hines refinanced Salesforce Tower for $610 million. On the flip side, Neil Bluhm’s JMB Realty had to inject more than $56 million to refinance 900 North Michigan.

For Hochberg, who once ran his family’s Sportmart chain before turning full time to real estate, the financing is less about aggressive growth and more about defense. Hochberg told the outlet that he doesn’t believe now is a good time to sell office buildings in Chicago “unless you have to.”

— Eric Weilbacher