Lenders Bet Big on Bank of America Tower Despite Chicago Office Woe

A rare pulse of capital is hitting Chicago’s moribund office market, where a $700 million refinancing for the Bank of America Tower is moving ahead as many downtown landlords are still fighting for survival.

The deal, backed by mortgage bonds, stands out in a city where few investors have been willing to touch office paper. The tower’s owners — Oak Hill Advisors, Callahan Capital Partners and Affinius Capital — are taking on the debt. The sale marks the largest office-backed bond offering in Chicago since the pandemic, a sign that commercial mortgage-backed securities buyers will still write checks for top-tier assets, Bloomberg reported.

Chicago’s office fundamentals are still scraping bottom. The city’s vacancy rate climbed to a record 26.5 percent in the third quarter, according to CBRE. While New York has started to regain some momentum, Chicago continues to wrestle with hollowed-out towers, sluggish leasing and the lingering drag of remote work.

The Bank of America Tower, though, remains one of the exceptions. The 57-story building at 110 North Wacker Drive is 98 percent leased, with Bank of America anchoring 17 floors and contributing roughly a third of total rent, according to bond documents cited by the publication. Its riverfront site and proximity to Union Station and Ogilvie Transportation Center have kept it competitive, and its slate of amenities — including restaurants from celebrity chefs such as José Andrés — gives it the kind of hospitality edge landlords now need to draw tenants.

The refinancing replaces a loan held by a group of banks, the outlet reported, and lands at a moment when falling interest rates have started to thaw capital markets.

Office-backed CMBS issuance all but froze after the pandemic, eventually saddling bondholders with once-unthinkable losses on AAA-rated slices. The resurgence began about a year ago with splashy New York deals tied to Rockefeller Center and the MetLife Building. Chicago, still viewed warily by many national investors, hadn’t yet joined that rebound.

But earlier this year, Salesforce Tower — just across the Chicago River from the Bank of America building — secured a $610 million refinancing, another data point suggesting lenders are tiptoeing back into the Class A towers with strong rent rolls.

— Eric Weilbacher