Citadel Center Hits Market Amid Brutal Loop Office Value Slump

The owners of Citadel Center are shopping the 37-story Loop office tower, a move that will test just how much appetite is left for downtown Chicago’s high-end offices after property values have dropped dramatically in the sector.

The building is currently owned through a joint venture of New York-based TPG Angelo Gordon and Houston-based Hines. The duo hired Eastdil Secured to market the 1.5 million-square-foot building at 131 South Dearborn Street, Crain’s reported.

There’s no asking price, but any trade is expected to come in far south of the $448 million mortgage the owners placed on the property in 2020. With office values down and debt costs up, comparable property sales suggest the tower’s market value could be a fraction of that figure.

The building is only 56 percent occupied, well below the downtown Chicago average of 73 percent, leaving a future buyer with a massive lease-up challenge at a time when remote work keeps sapping demand. The property’s recent wins may soften the blow: Bain signed a 173,000-square-foot lease there earlier this year, and JPMorgan Chase expanded on a short-term deal into 126,000 square feet at Citadel Center while renovating its own nearby office tower at 10 South Dearborn.

The deals helped fill some of the gap left after the building’s anchor tenant, the hedge fund Citadel, moved its headquarters to Miami in 2022, later striking a lease buyout to help make room for Bain.

Eastdil is pitching the tower’s updated amenities — a $10 million lobby and elevator renovation in 2018 — and the chance to lock in income from “premium” tenants with more than $160 million left on their leases. The weighted average lease term sits at 6.4 years, giving some breathing room as a new owner hunts for tenants. The tower also offers 300,000 square feet of contiguous space in the high-rise portion and naming rights for a prospective big fish.

The property has a checkered history. The current owners swooped in with $50 million of fresh equity in 2016 to rescue it from default, then tried to flip it in 2019 for $750 million. The pandemic and its aftermath killed that plan, forcing a refinancing with BayernLB and a mezzanine loan from Brookfield Asset Management.

Comparisons of recent sales in the Loop aren’t exactly equal, but could indicate just how steep a discount the tower could go for. Late last year, 70 West Madison Street went for about $60 per square foot, a 77 percent discount from its 2014 price, to buyers Namdar and Mason Asset Management.

The 57-story building also had leasing issues, falling from 90 percent leased during the 2014 purchase down to 68 percent occupied when it sold last year.

Elsewhere in the Loop, a Namdar-led group last year paid a little less than $20 million, or about $40 per square foot, to obtain the debt position for the office tower at One North LaSalle Street, a discount of nearly 73 percent from the property’s remaining loan balance of $74 million. The deal allows Namdar to seize the property.

If recent trades are any guide, the outcome won’t be pretty. The outlet’s review of 19 downtown office sales since 2023 found buildings collectively lost about $2 billion in value compared to pre-COVID pricing.— Eric Weilbacher