A Denver-area investor that plans to invest billions of dollars in all-cash acquisitions of discounted U.S. office properties has lined up its next big deal in Chicago’s Loop business district.
Real Capital Solutions has a preliminary agreement to buy the 40-story office tower at 190 S. LaSalle St. in Chicago’s Loop business district at a fraction of its previous valuation, according to people familiar with the situation.
Louisville, Colorado-based Real Capital is betting that a bargain price will provide wiggle room to overcome existing and expected vacancies, as well as historically low demand for corporate space.
The deal is in the early stages and still could fall apart. An exact price that's under discussion for the 798,782-square-foot building could not be determined, but it is believed to be just a fraction of the $167.5 million loan that lenders including U.S. Bank provided in February 2020, just weeks before the onset of COVID-19 rocked the office market.
It is even a larger discount to the $230 million that Boston-based investor Beacon Capital Partners paid for the building, designed by architects Philip Johnson and John Burgee, in late 2019.
U.S. Bank, which also is a tenant in the tower, and Beacon hired Cushman & Wakefield brokers to seek a discounted sale in March, with hopes to recoup some of their losses.
Real Capital, Beacon and U.S. Bank did not immediately respond to requests for comment from CoStar News.
US office buying strategy
The deal fits within Real Capital’s broader strategy to deploy a pile of cash toward highly discounted office deals throughout the country, with the firm telling CoStar News in January that it plans to spend $3.5 billion in cash mostly on discounted office transactions over the next three years.
At the time, Chief Acquisitions Officer Adam Abeln told CoStar News that the firm also was looking at deals in several markets including Chicago.
The company outlined that strategy in January after scooping up a Dallas tower for $66 million, a major discount from the $120.5 million it last sold for in 2017. Late last year, Real Capital bought an office building in Washington, D.C., for $29.3 million, a fraction of the more than $79 million it previously sold for in 2010, while also expanding its local portfolio with a discounted deal in Denver.
The Chicago tower at 190 S. LaSalle has relatively low vacancy of around 15%, according to CoStar data. But several tenants, including Bain & Co., are expected to leave in the coming years.
Completed in 1987, the tower underwent $13.6 million in renovations in 2023, which included improvements to the fitness and conference centers, lobby and cafe, according to Cushman & Wakefield materials on the property.
The tower is known for its green gabled roof, which allows the postmodern high-rise to stand out on the skyline.
LaSalle Street challenges
People familiar with the building say its high quality and upgraded amenities could help it rise above broader challenges on and around LaSalle Street, where a stock of older towers and high vacancy have pushed several landlords into financial distress. That also has led city officials to support putting public dollars toward converting some office space into affordable apartments.
Local developer Mark Goodman, whose firm Mark Goodman & Associates looked into buying 190 S. LaSalle, said the potential for new residents and retail, and the coming arrival of Google office workers to the redeveloped James R. Thompson Center, could lift office values in the longtime financial district.
“LaSalle Street is evolving, but nobody knows how it’s going to play out,” Goodman told CoStar News. “Nobody knows what the Google effect is going to be. It’s an interesting set of dynamics going on.
“In a time of uncertainty, it affects how aggressively some people will spend their money. Whoever acquires [190 S. LaSalle], I think they will do well. LaSalle Street has its challenges, but I’m a fan of the building and the investment.”
Beacon has experienced the Loop’s challenges previously during this cycle, selling the 30-story tower at 303 E. Wacker Drive at a huge loss and being hit with a foreclosure suit on the Ludwig Mies van der Rohe-designed AMA Plaza tower.
On the other side of the distressed market, Beacon also has bought the 36-story tower at 333 W. Wacker Drive at a massive discount to previous pricing.
For the record
The seller is represented by Cushman & Wakefield brokers Tom Sitz, Cody Hundertmark and Dan Deuter.