A Chicago real estate investor has bought out its lender on a vintage building near Union Station, keeping control of its longtime property in a twist on the trend of discounted office deals in recent years.
Blue Star Properties recently bought out the nearly $39 million loan from lender Wells Fargo Bank at a discount to the loan value on the property at 328 S. Jefferson St., Blue Star President Craig Golden said.
He declined to comment on the price, which followed an attempt by Cushman & Wakefield brokers hired by the bank to sell the 10-story building earlier this year.
The deal by the existing owner to take control of a building at a discount to the value of the debt follows a string of several similar deals in Chicago and other cities, typically with a new owner stepping in at a steep discount to the value of the loan.
In this case, Blue Star said the recapitalization with a new loan will allow the firm to go back on the offensive in seeking new tenants for the 293,037-square-foot building where the firm has its offices.
“We were able to finish a deal with the bank after two years of discussions,” Golden said. “During that time, we had been handcuffed from doing new deals or improving the building in any way. We like the building, and we have liked it for 15 years.
“Now we can aggressively look for tenants and make upgrades to the property.”
The Chicago real estate firm took out a $24 million loan on the property in 2007, but the principal was increased to almost $39 million in a series of loan modifications in recent years, Cook County property records show.
Blue Star’s payment to buy out the loan was just over $14 million, according to Crain’s Chicago Business, which first reported the deal.
Wells Fargo declined to comment.
Golden said the firm took out an undisclosed amount of new debt from Old Second Bank to pay off Wells Fargo and fund upcoming new leases and upgrades to the nearly century-old building. Details on the new loan could not yet be found in Cook County property records online.
“Wells Fargo was looking to get out and we were looking to stay,” Golden said. “I’m glad we were able to work it out amicably.”
The Jefferson Street building was 61% occupied with a weighted average lease term of 3.1 years when it went on the market for sale in July, according to a Cushman & Wakefield brochure. The building opened in 1928 as the Igoe Mercantile Building, according to the brochure.
Blue Star has a long history of owning and redeveloping historic properties, including its recent purchase of the former home of the Chicago Daily News at 2 N. Riverside Plaza from the estate of Chicago real estate billionaire Sam Zell. Blue Star and another Chicago firm, the Wolcott Group, plan a $50 million renovation after the building’s first ownership change in a half-century.
For the record
The sale was brokered by Cushman & Wakefield brokers Cody Hundertmark and Tom Sitz.