An Oregon investor has completed its acquisition of a Chicago office tower at a steep discount to previous valuations, wagering nearly $52 million on a long-term recovery of office demand.
Portland-based Menashe Properties last week completed the purchase of the building at 125 S. Wacker Drive from Canada’s La Caisse, CEO Jordan Menashe confirmed to CoStar News.
He declined to comment on the price, but someone familiar with the deal said it was $51.5 million.
That is a little more than one-third of the previous price when the real estate arm of Quebec’s largest pension fund bought it in 2017. Then known as Ivanhoé Cambridge, the Canadian investor bought the property for $145 million.
CoStar News first reported Menashe’s plans to buy the tower in August.
Now completed, the deal is the latest example of office properties in Chicago and other cities selling at huge discounts to peak pricing, before remote work trends emerged after the arrival of COVID-19 in early 2020.
Menashe said there are already signs that office values will recover and that there is a dearth of space available for smaller tenants looking to sign leases in top locations such as Chicago’s Wacker Drive.
With top-tier towers nearly full, some buildings outdated or in financial distress and others being converted to apartments or other new uses, there are relatively few options for tenants looking to move in Chicago, Menashe said.
“Take out ghost buildings that can’t transact, and figure that nothing new will be built for five or six years, and we’re under-officed,” Menashe said.
Nearby, Menashe previously bought the 29-story tower at 230 W. Monroe St. in the Loop business district for $45 million in September 2023. That deal came after a pause of more than a year on major office transactions in Chicago.
Since then, Menashe said the firm has significantly stabilized the property with about 50 new leases and renewals.
Although it is surrounded by properties with major office tenants — including the city’s tallest skyscraper, 110-story Willis Tower, across the street — the building at 125 S. Wacker is mostly leased to tenants taking up less than one floor.
Menashe plans to build eight to 10 move-in-ready spec suites to immediately start filling the roughly 37% of the building that is vacant, he said.
“This is very similar to 230 [W. Monroe]. It’s a pure lease-up play,” Menashe said.
“I love smaller-tenant buildings because I can add value through the personal touch and getting involved,” Menashe added. “They think like I do, and they care about their bottom line. We’re going to be that value proposition. What does a tenant get for what they pay? I want to offer the same or better for less.”
Montreal-based La Caisse declined to comment on the sale.
During its ownership, La Caisse poured $21 million into building systems, common areas and amenities, according to JLL, which began marketing the property for sale in April.
Improved national outlook
The outlook for U.S. office properties is improving, with an expected net increase of approximately 10 million square feet of occupancy over the next four quarters, according to a recent CoStar analysis. That is revised from a prior forecast of a net decrease of 4 million square feet of national occupancy.
Menashe believes the return of many investors to the office sector eventually will push up prices well above where they were when the firm entered Chicago more than two years ago.
Increased competition from buyers will make it more challenging to add to the firm’s portfolio in Chicago and other markets, Menashe said, although he continues seeking deals.
“People definitely went from office curious to office serious,” Menashe said. “That goes for everywhere, from Chicago to Portland. The word is out. That will push prices up.”
For the record
The seller was represented by JLL brokers Jaime Fink, Bruce Miller, Patrick Shields, Sam DiFrancesca and John Mason. Stream Realty Partners brokers Mark Baby and Ben Cleveland will oversee leasing.