Two dramatically different real estate deals completed Tuesday in Chicago’s Loop business district for a combined $755 million illustrate the valuation gulf between trophy towers and the rest of a still-recovering U.S. office market.
Owners of the 55-story Bank of America Tower finalized a $700 million refinancing after the riverfront property at 110 N. Wacker Drive was appraised at just over $1 billion.
Meanwhile, two Great Neck, New York-based firms known for hunting bargains — Namdar Realty Group and Mason Asset Management — closed on the purchase of the 40-story tower at 190 S. LaSalle St. The price couldn't immediately be found in online property records, but people familiar with the deal said it was $55 million — a small fraction of the $230 million that Boston-based Beacon Capital Partners paid for it in late 2019.
The newest skyscrapers along the Chicago River and other prominent locations always have achieved the city’s top rents and sale prices. But, as the Tuesday deals demonstrate, the distance has grown much wider since the onset of the pandemic in early 2020 — even for high-quality towers with a prominent place on the skyline and well-known architects, as in the case of 190 S. LaSalle.
Other U.S. office markets have seen similar dynamics at play, with trophy towers landing large leases and achieving far higher valuations than lower-end, older-generation properties.
Some real estate professionals in Chicago see a run of downtown sales in 2025, even at big discounts, as a positive sign of lenders and sellers accepting a new reality on values. The run of new owners with a lower cost basis is expected, in turn, to create a deeper pool of owners that can compete financially for new leases.
That could lead to further liquidity in the office market in 2026 and beyond.
Riverfront refinancing
Chicago-based Callahan Capital Partners and New York-based Oak Hill Advisors on Tuesday announced the completion of their expected commercial mortgage-backed securities deal for the more than 1.5 million-square-foot Bank of America Tower.
The five-year loan was led by JPMorgan Chase and included debt from Bank of America, Wells Fargo, Goldman Sachs and BMO, according to a statement. The debt is being packed and sold to bondholders.
“This financing demonstrates that the capital markets continue to recognize the strength of best-in-class assets operated by disciplined ownership teams,” Tim Callahan, CEO of Callahan Capital Partners, said in the statement. “Our team’s focus on quality, detail and performance has positioned 110 N Wacker as a national example of what resilient office investment looks like.”
The venture of Callahan and Oak Hill bought the controlling interest in the Wacker Drive tower in early 2022. It was sold by the developers of the project, Howard Hughes Corp. and Riverside Investment & Development.
Since the sale, the tower completed in late 2020 has gone from 78% to 98% leased, according to the statement.
The refinancing is one of the largest in Chicago since the pandemic, trailing only 601W’s $830 million CMBS deal for the redeveloped Old Post Office in late 2021. More recently, developers of the 60-story Salesforce Tower, another riverfront trophy, landed a $610 million CMBS loan.
LaSalle Street sale
CoStar News first reported plans by affiliated firms Namdar and Mason to buy 190 S. LaSalle in October. The sale price was unknown at the time.
The sale price was significantly below the value of a $167.5 million loan that Beacon took out in February 2020, just before the arrival of COVID. Lender U.S. Bank, which also is a tenant in the high-vacancy building, declined to comment.
The buyers and Beacon also did not immediately respond to requests for comment from CoStar News.
The deal by Mason and Namdar came after another firm backed off a deal to purchase the tower known for its green gabled roof.
Namdar and Mason previously pulled off a similar deal, buying the 57-story tower at 70 W. Madison St. after the initially chosen buyer failed to complete the purchase.
The Long Island firms, best known for investing in distressed shopping malls, also previously acquired the 47-story tower at 1 N. LaSalle St. by buying the note on a matured loan and then seizing the property.
The previous deals are believed to have totaled about $100 million.
Completed in 1987, the postmodern building at 190 S. LaSalle was designed by architects Philip Johnson and John Burgee. Beacon invested $13.6 million in renovations, according to materials from Cushman & Wakefield, which began marketing the property for sale in March.
The new owners will seek out tenants to fill existing vacancies and upcoming ones, including major tenant Bain & Co.’s upcoming move to 131 S. Dearborn St.
In other recent examples of discounted sales in downtown Chicago, New York-based 601W bought the 16-story building at 525 W. Van Buren St. for $35 million, down from a previous sale price of $135 million in 2015, and Portland, Oregon-based Menashe Properties paid $51.5 million for the 31-story at 125 S. Wacker Drive, down from a previous sale price of $145 million in 2017.
For the record
Cushman & Wakefield’s Tom Sitz and Cody Hundertmark brokered the 190 S. LaSalle sale.