Brookfield’s retail arm is committing to a long-term extension of its Chicago lease in a sprawling River North office building, providing some good news for bondholders of a $310 million loan on the property that is in default.
The major commercial real estate owner is close to finalizing a 15-year extension of its approximately 124,000-square-foot lease at 350 N. Orleans St., a Brookfield spokesperson told CoStar News.
Space on the third and fourth floors of the wide building serves as the corporate headquarters of Brookfield’s retail arm.
If the deal is finalized this month as expected, it will be a relatively rare example of a lender-turned-owner landing a long-term deal with an existing or new tenant in Chicago or other large U.S. city.
The deal demonstrates how some lenders, or in this case bondholders on commercial mortgage-backed securities debt, have become more proactive in trying to recoup some of the massive value loss that has occurred in the office sector since the onset of COVID-19 in early 2020.
Brookfield’s decision to stay could allow the building to eventually sell for millions more than it would have in late 2023, when it previously went on the market for sale, industry professionals say.
Blackstone bought the more than 1.3 million-square-foot Orleans Street building adjacent to the Merchandise Mart for $378 million during a booming office leasing market in 2015 and later refinanced the property with a $310 million CMBS loan in 2018.
After the loan matured in 2023, JLL brokers were hired to sell the building. At the time, Blackstone said in a statement that it “wrote down this investment to zero last year” and was walking away from the property.
A 522-room, dual-branded Voco Chicago Downtown & Holiday Inn hotel is on floors 14 to 23 of the property’s south tower. That property is separately owned.
Earlier this year, Blackstone was hit with a foreclosure suit for $346 million, an amount that included accruing interest and other fees, The Real Deal Chicago reported at the time.
The property is nearly 40% vacant today, according to CoStar data.
On behalf of bondholders in the CMBS debt, special receiver KeyBank, property receiver Trigild and a leasing broker from Lincoln Property Co. have continued to seek out leases. That includes an expansion by existing tenant Stripe, an online payment company, earlier this year, Crain’s Chicago Business reported.
KeyBank, Trigild and Lincoln did not respond to requests for comment from CoStar News.
Busy year for discount deals
This year has been an active one for office tower sales in Chicago and other cities, although many properties are selling at massive discounts to previous valuations and the value of their loans.
But acceptance of losses by lenders and the return of investors to the office sector is causing lenders to become more decisive, according to Adam Showalter, who is not involved in 350 N. Orleans. Showalter is managing director of Stream Realty Partners’ national office investor services, and he is part of a team that the firm formed last year to advise lenders on how to deal with seized properties.
Showalter said banks that previously sought to delay decision-making on troubled properties now are changing course.
“What has changed in 2025 has been lenders of all types being less willing to do short-term [loan maturity] extensions,” Showalter said. “They are more focused on finding a resolution, whether that’s a sale or owning and operating an asset.”
Trying to hold a property and add tenants involves spending on leasing costs on an already money-losing loan. But in some cases, those investments can significantly increase the property’s ultimate sale price, Showalter said.
Key factors in the decision include the quality of the building and its location, he said.
“I think most lenders are preferring to sell the asset now and take the write-down,” Showalter said. “The ones that aren’t either have the resources to own and operate an asset for an extended period of time, or it’s a CMBS loan where a bunch of bondholders are unwilling to take the loss and believe that they can recover significant value over time.”
For the record
The tenant is represented by Savills brokers Robert Sevim and Joe Learner. The landlord is represented by Lincoln Property broker Matt Hickey.