A trio of office buildings in Chicago are in new hands this month after the real estate investment arm of consultancy Alvarez & Marsal decided to cut its losses.
The firm’s latest property to hit the chopping block was 205 West Wacker Drive, which New York-based Alvarez gave up via a deed in lieu of foreclosure agreement with Boise, Idaho-based lender A10 Capital last week, public records show.
A10 listed the $27.5 million loan tied to 205 West Wacker with JLL in September but so far hasn’t ended up closing a deal. The lender listed the distressed loan note in an attempt to recoup the unpaid principal Alvarez had left toward its $35 million mortgage on the building. Alvarez originally took out the loan in 2015.
The 271,000-square-foot office tower was originally built in 1928 and last sold for just under $23 million in 2013, or less than $84 per square foot. At the time it was sold to Chicago-based investor Ameritus, according to Cook County records. Alvarez became the manager of the property’s ownership venture in 2015 and refinanced the property through A10.
The Wacker Drive property was last renovated in 2014 and has struggled like many downtown office buildings through the rise of remote work since the onset of the coronavirus pandemic. The building was 43 percent leased when the loan note was listed last year, according to JLL.
It’s unclear how A10 plans to recoup its investment into 205 West Wacker. While many office landlords have invested into creating modern amenity spaces for tenants to keep their buildings attractive to potential occupants, it’s unknown whether the lender is prepared to pour more cash into the struggling property.
A10 and Alvarez didn’t return requests for comment.
It was the third Chicago office building Alvarez walked away from since late March. About a month ago, the firm sold a pair of office buildings 542 South Dearborn Street in the South Loop and 459 West Erie Street in River North to a joint venture of Chicago-based Concord Capital and Northfield-based QMR Capital Partners.
Alvarez paid $24.5 million for those two buildings in 2018, backed by a $16 million loan. The new owners, however, paid just $8.5 million for the buildings, and plan to re-purpose the offices into apartments, Concord’s Drew Millard confirmed.
Office-to-residential conversions have been pitched as a solution to a glut of outdated office space that has hit the market since the pandemic. Such transformations are expensive endeavors, however, and require developers to buy properties at rock-bottom prices or receive government subsidies to ease construction costs.
The city of Chicago has been spearheading an effort to solicit proposals for office-to-residential conversions in the loop in hopes of increasing housing supply. In exchange for leading the conversions and including a quota of affordable units, qualifying developers receive tax increment financing, known as TIF funds, from the city.
As of late last year, city officials were poised to pump $317 million in TIF into the broader slate of projects under the initiative that’s promising around 1,800 units, more than 530 of them affordable.
The recent transactions come after Alvarez gave up two other office buildings within the last two years.
Last year, the company sold off 303 West Erie Street in River North to a joint venture of Cubed Real Estate and developer R2 for $7.5 million, half of what Alvarez paid to buy it in 2017.
Alvarez also faced a $22 million foreclosure lawsuit initiated in 2024 by a group of bondholders in the mortgage debt for 205 West Randolph Street. The lender is set to become the owner of that 23-story, 199,000-square-foot building in coming weeks when a court finalizes a foreclosure sale that occurred this summer, according to public loan data.