Golub and BlueFive’s Mag Mile Office Sent to Special Servicer

Another Magnificent Mile office tower is on the brink of default, and set to drag its landlords, Abu Dhabi-based BlueFive Capital and Chicago-based Golub & Co., into further financial distress.

Their 28-story building at 625 North Michigan Avenue had its $50.6 million commercial mortgage-backed securities debt transferred to special servicing last month due to cash flow issues, with loan servicers noting it’s on track for “imminent default” after the property’s performance plunged far below underwriting, according to Morningstar Credit.

Occupancy at the 290,000-square-foot office portion of the property fell to just under 64 percent this summer, down from 92 percent when the loan originated in 2019. Its net cash flow is off 43 percent from initial projections, and the debt service coverage ratio — the amount of building revenue compared to the cost of its debt service — fell to just 0.41 in the first quarter of this year, far below the 1.35 trigger for lender control, loan servicer notes collated by Morningstar show.

Golub and BlueFive — the latter of which gained control of the property after its September absorption of Dubai-based Neo Capital — now face the risk of foreclosure on the loan, according to Morningstar.

The ownership structure has shifted over time. Golub and Los Angeles-based CIM Group previously co-owned the building before CIM sold it to Neo for $72 million in 2019. Golub still holds a stake in the property, marking at least its second Mag Mile distress saga this year following an episode at the tower at 444 North Michigan.

That 36-story building was seized by Blackstone earlier this year via a deed-in-lieu of foreclosure. CIM was also a part-owner in that deal.

At the building at 625 North Michigan, the situation deteriorated after SS Research — formerly the largest tenant, occupying 6 percent of the gross leasable area — vacated in May. Despite the tower’s average condition with no major maintenance flagged, its revenue has been too weak to keep up with loan obligations, lender commentary shows.

The building’s lower four floors — which house the retail portion — are owned separately and have had their own issues. In 2024, investor Ben Ashkenazy surrendered that piece of the building to its lender to resolve a $61 million debt, as The Real Deal previously reported. The deed-in-lieu of foreclosure wiped Ashkenazy’s equity and further fragmented the property’s ownership structure.

The problems at the tower at 625 North Michigan add to a growing list of distress cases on the once-vaunted Mag Mile shopping corridor. Nearby, the office tower at 500 North Michigan recently sold for only $5.1 million to Greenwich, Connecticut-based Commonwealth Development Partners, which plans a residential conversion. The fire sale price was a fraction of its pre-pandemic value, which once supported a $94 million loan against the property taken out by its previous ownership.

Just to the south on the Mag Mile, Louisville, Colorado-based Real Capital Solutions is in talks to buy the frazzled office building at 401 North Michigan Avenue. It fell into trouble after its owner, Walton Street Capital, took on a $160 million debt from lender ING, and the property’s value has since dropped, potentially below that figure.

Real Capital is reportedly eyeing an offer of more than $130 million for the 748,000-square-foot building, but well less than the ING loan balance. The would-be buyer is a backup for Walton after the Olayan Group, a Saudi Arabian enterprise, expressed interest in the building at 401 North Michigan before backing out of a purchase.

While BlueFive touted its September acquisition of Neo Capital as a strategic foothold in North American real estate, the distressed status of the tower at 625 North Michigan suggests a rough patch within its portfolio. The firm, which announced the integration of $650 million in Neo properties, did not respond to a request for comment. Golub declined to comment, and LNR Partners, the special servicer for the building at 625 North Michigan, didn’t return a request for comment.

President Donald Trump appeared to criticize the state of the Mag Mile real estate market this fall with a cryptic post to social media, though local real estate professionals pushed back against his narrative of bleak prospects. Retail tenants have begun expressing more interest and making moves into storefronts on Michigan Avenue over the past two years, bringing vacancy down from post-pandemic peaks.

But the office market remains a challenge in Chicago and across the U.S., as remote and hybrid work, along with elevated interest rates compared to pre-pandemic keep flummoxing landlords who face upcoming loan maturities.

Whether the tower at 625 North Michigan becomes the next to trade at a deep discount — or heads into foreclosure — now rests with special servicers and an ownership group struggling to stop the bleeding.