Titan Power Buys Chicago Office for Multifamily Conversion

As dominoes of Alvarez & Marsal’s distressed Chicago office portfolio keep falling, a new crop of buyers sees a silver lining in the city’s multifamily market boom.

An affiliate of the Chinese firm Titan Power Overseas Investment scooped up the 23-story office high-rise at 205 West Wacker Drive out of foreclosure for $15 million, CoStar reported. The transaction took the form of a deed-in-lieu of foreclosure, resolving a lawsuit over $27.5 million in unpaid mortgage debt left behind by its former landlord, New York-based Alvarez & Marsal.

The lender, Boise, Idaho-based A10 Capital began shopping the troubled loan note through a JLL team last fall. JLL brokers Jaime Fink, Bruce Miller and Sam DiFrancesca represented 205 West Wacker’s lender A10 Capital in its sale to Titan Power.

Now, Titan Power — operating as TP Management — has a vision to cure the 1928-built property’s bleak 43 percent occupancy rate: apartments. The firm tapped Chicago-based WindWave Real Estate to advise on a phased conversion for the building’s upper floors, according to the publication. Kylie Ning, head of market strategy at Titan, confirmed to the outlet that her firm plans to transform the underutilized real estate into “high-quality boutique apartments.”

It’s a familiar fate for Alvarez & Marsal’s battered Chicago office portfolio as the firm surrenders its distressed properties. Several former A&M office investments are now being teed up for office-to-residential conversion projects. Earlier this spring, ventures led by local developer Drew Millard’s firm Concord Capital bought two distressed office properties formerly owned by Alvarez, at 542 South Dearborn Street in the South Loop and 459 West Erie Street in River North, for just $8.5 million, down from the nearly $25 million Alvarez paid for the properties in 2016, using a $16 million loan to do so. Those properties are also now being turned into housing.

Other opportunists are also circling the wreckage. Local investor Sanjay Gandhi recently swooped in to buy another piece of the distressed pie, grabbing the 23-story high-rise at 205 West Randolph Street at a steep discount out of an Alvarez & Marsal foreclosure. That sale followed a foreclosure suit filed by its loan’s special servicer LNR Partners over a $19 million debt on the property that had also been floated for a potential multifamily pivot.

Titan Power’s $15 million acquisition on Wacker Drive marks another chapter in the broader narrative of downtown Chicago: opportunistic buyers swooping in on underwater corporate space to cash in on historically strong apartment demand. The conversions will add housing units to a historically small pipeline of apartments under construction in the Chicago area, where brokerage Marcus & Millichap forecast this year to hit the lowest number of new apartments built than any time since 2012.

— Sam Lounsberry