About two years after paying $45 million for a 29-story tower that ended a drought on Chicago office sales, an Oregon investor has secured a loan for the full value of the purchase price in a financing that stands out after years of struggles in the property sector.
Menashe Properties has borrowed $45 million from a Goldman Sachs affiliate on the tower at 230 W. Monroe St. in the Loop business district, the companies confirmed.
That is the exact amount that the Portland-based firm paid in September 2023, an all-cash deal that ended a drought of more than a year between major office sales in downtown Chicago.
Loans in the full amount of the purchase price are unusual, in this case likely implying that the value of 230 W. Monroe has increased significantly since Menashe Properties bought it at a massive discount to its pre-pandemic valuation.
The loan has national significance after years of crushing drops in valuations because of remote-work trends, higher borrowing costs, corporate cutbacks and other factors.
Menashe Properties CEO Jordan Menashe said several factors have begun to shift in the favor of landlords, including older-generation buildings being converted to new uses and high-end towers filling up during a virtual standstill on new construction throughout the country.
“We were blessed,” Menashe told CoStar News. “Our timing was probably at or near the bottom. It’s just one data point, but I think it’s fair to say that we’ve started to become under-officed in major markets.
“I will challenge anyone who says office is not coming back. There has been a supply-and-demand shift.”
While many older, high-vacancy buildings are still valued far below the value of their debt, there already have been examples of trophy towers rising above broader distress in the U.S. office market.
In Chicago, major refinancing deals have included a redeveloped Old Post Office landing $830 million in late 2021. In deals this year involving new trophy towers along the Chicago River, the 60-story Salesforce Tower landed a $610 million loan, and the 55-story Bank of America Tower closed on $700 million in long-term financing.
All three of those large deals were commercial mortgage-backed securities deals not connected to an ownership change.
Long-term impact
Other buildings still face long paths out of distress, with many 2025 sales coming at prices too low to fully pay off loans. If they continue, lower sale prices and valuations could have long-term ramifications for homeowners and local government agencies that benefit from property taxes.
“This is really good for anybody and everybody who has a stake in the West Loop, including Cook County,” Menashe said of the full-value financing at 230 W. Monroe.
The 230 W. Monroe financing was completed in October, according to Cook County property records.
That was just over two years after the tower sold to Menashe Properties at just a fraction of the $122 million that the property previously sold for during a strong leasing market in 2014.
Menashe Properties, which invests in office properties throughout the country, didn’t try to find acquisition debt at the time of the 2023 deal in Chicago because there were virtually no lenders active in the space, Menashe said.
Since then, lenders have begun returning to office deals, Menashe said.
Occupancy on the rise
Meanwhile, leasing brokers from Stream Realty Partners have signed more than 50 new leases, renewals and expansions, the firm said, increasing occupancy from 60% to 85%. That effort has been boosted by the construction of move-in-ready spec suites.
Talks with Goldman Sachs on potential financing continued as leases were signed and the property’s value increased, Menashe said.
“We are pleased to support Menashe Properties on this milestone,” said Liana Perrault, a senior lending adviser at Goldman Sachs, in a statement. “This is the kind of transaction that demonstrates owner and lender partnership from acquisition to loan funding. As the office sector continues to reset, buildings with strong ownership, leasing momentum, and a clear operational thesis stand apart.”
Unlike many highly discounted purchases, Menashe hasn’t put in any capital beyond the $45 million purchase price, he said. Leasing costs and upgrades to the building have been funded by cash flow from the building, Menashe said.
The financing, an alternate form of the traditional cash-out loan, helps fund new acquisitions such as the recent $51.5 million purchase of the 31-story Chicago tower at 125 S. Wacker Drive. That deal was backed by a $35 million loan from Obra Real Estate, according to county property records.
“We’re ready for the next deal, but it’s getting harder to buy,” Menashe said.