A Long Island-based investor long known as a buyer of distressed retail properties has agreed to buy Citadel’s 37-story former headquarters in Chicago, striking its third office deal in the city in less than a year.
Great Neck, New York-based Kohan Retail Investment Group has a contract to buy the approximately 1.55 million-square-foot building at 131 S. Dearborn St. in the Loop business district, according to people familiar with the situation.
The exact sale price could not be determined, but it is believed to be a massive discount to the $448 million in debt that was taken out by property owners TPG Angelo Gordon and Hines in a 2020 refinancing from lenders led by Germany’s BayernLB.
The deal has not been completed and still could fall apart. If the purchase is completed as expected, it would be give Kohan control of more than 3.7 million square feet combined of high-vacancy office properties in Chicago.
Kohan entered the Chicago office market with the $45 million purchase of the 65-story tower at 311 S. Wacker Drive last June, with plans to seek out new office tenants and potentially convert part of the property to a hotel.
Late last year, Kohan bought a $60 million mortgage on the 28-story tower at 33 W. Monroe St. at a discount before early this year seizing the property via a deed in lieu of foreclosure, Crain’s Chicago Business reported.
Those deals follow a trend in Chicago and other large cities in which many office properties are selling at steep discounts to pre-pandemic values, with new owners betting that a lower investment basis will leave room to make improvements and sign new leases.
TPG Angelo Gordon declined to comment. Kohan and Hines did not immediately respond to requests for comment from CoStar News.
The deal for 131 S. Dearborn would give Kohan control of high-profile property with some blue-chip tenants. But about 45% of the tower is vacant, according to materials from Eastdil Secured, which was hired last year to find a buyer.
Efforts to sell the tower formerly known as the Citadel Center began in September, almost three years after billionaire Ken Griffin announced that Citadel was moving its headquarters from the tower to Miami.
Citadel has since moved its Chicago office to a far smaller space at 353 N. Clark St.
Consulting firm Bain & Co. has leased the top five floors of the tower, a large block of Citadel’s former space. Last year, existing tenant JPMorgan Chase expanded its space in the building by 126,000 square feet, up to a total of 321,000 square feet.
At the time the tower went on the market for sale, it was just over 55% leased with a weighted average lease term of 6.4 years, according to Eastdil materials.
Eastdil emphasized the opportunity for a buyer to offer naming rights and a private entrance for a tenant needing about 300,000 square feet of contiguous space.
For the record
The sellers are represented by Eastdil Secured brokers Bryan Rosenberg, David Caprile, Alex Caron and Sam Byczek.