The value of Chicago’s tallest skyscraper has plunged in a recent appraisal that says the 110-story former Sears Tower is now worth far less than the $1.3 billion-plus that Blackstone still owes on it.
Willis Tower’s appraised value has fallen to $1.03 billion, according to a report Thursday by Morningstar Credit.
That is sharply down from the pre-COVID appraised value of $1.78 billion in 2018, when the tower at 233 S. Wacker Drive was refinanced with new commercial mortgage-backed securities debt.
It is the latest example of how office properties, even one of the country’s most recognizable skyscrapers, have shed value even if they’re relatively well leased.
In Willis Tower’s case, the plunge also comes despite a $500 million expansion to the base of the tower to add retail and entertainment, a project completed in 2022. That investment is on top of the $1.3 billion that Blackstone paid amid soaring property values in 2015.
The revised appraisal resulted from the property entering special servicing as part of Blackstone’s negotiations to extend the maturity date on an interest-only CMBS loan for $1.325 billion that had been set to mature in March.
Yet there are signs that much of the lost value could be recovered in the next couple of years.
CoStar News reported in February that Blackstone had struck a deal to extend the loan maturity for at least three years, and possibly until 2030 with extension options, on the 1,451-foot tower that was once the tallest in the world.
The latest extension followed similar agreements in previous years on debt from lenders including Barclays and Deutsche Bank that initially was scheduled to mature in 2022.
In February, Blackstone said the latest extension reflected its long-term belief in the property, citing a run of leases over the past 18 months.
In one recent deal, for-profit education company Adtalem Global Education signed a 15-year lease to move its headquarters to about 84,000 square feet in the tower.
The approximately 4 million-square-foot property is almost 86% leased, according to CoStar data.
By that and other metrics, the property is in relatively strong standing after years of remote work trends, corporate cutbacks and other factors that have pushed down office values throughout the country.
Net operating income — a key profitability measure that subtracts operating expenses from income generated — was more than $119 million in 2024, according to a loan modification report. That was up from about $118 million in 2023 and less than $86 million in 2022.
Those numbers indicate that despite the reduced appraisal, Blackstone still could stand to generate well over $100 million in profits annually from Willis Tower while hoping property valuations rise in the five years before it needs to be refinanced or is sold.
The “stabilized” value is expected to rise to almost $1.22 billion by February 2027, according to the refinancing report.
Willis Tower’s revenue comes from office and retail leasing as well as broadcast antennas and the Skydeck tourist attraction. Skydeck revenue increased 48% between 2019 and 2024.
“Our recent extension to the loan term reflects our continued belief in the strength of Willis Tower," Blackstone said in a statement to CoStar News. "We believe the building’s transformative renovation has positioned it for success, as demonstrated by over 400,000 square feet of leasing in the past 18 months and more than 1.2 million annual Skydeck visitors.”
Seven tenants occupy more than 100,000 square feet of offices in Willis Tower, the largest of which is the headquarters of United Airlines, according to CoStar data.
Sears’ name came off the building in 2009, years before Blackstone bought it, as part of a lease with Willis Group Holdings. That company’s merger with Towers Watson in 2016 created a company name closely resembling that of the Chicago skyscraper, Willis Towers Watson.