A Colorado firm has backed off plans to buy a 40-story office tower in Chicago’s Loop business district in a deal that highlights the challenges of financing office deals — even ones for high-quality properties at steep discounts to previous values.
Real Capital Solutions no longer has an agreement to buy the tower at 190 S. LaSalle St., known for its green gabled roof, according to people familiar with the situation. The setback ends, at least for now, plans by the Louisville, Colorado-based investor to buy its first office tower in Chicago.
Real Capital Solutions in January told CoStar News that it plans to spend $3.5 billion in cash on discounted office acquisitions over the next three years, with Chicago as one of the markets it is targeting.
CoStar News first reported in June that the firm was negotiating to buy the distinctive but high-vacancy building at 190 S. LaSalle out of distress.
But that deal recently was called off as office buyers face headwinds in lining up loans and equity for such deals amid historically low demand for corporate space, according to people familiar with the deal.
In a statement to CoStar News, Real Capital Solutions Chief Acquisitions Officer Adam Abeln neither confirmed nor denied calling off plans to buy the LaSalle Street tower while reiterating interest in entering the market.
“We can’t respond to market rumors but what I can tell you is we are actively looking at deals in the Chicago market and will announce any deals when we close,” Abeln said in the statement.
The market for Chicago office sales has picked up since the end of last year as many owners and lenders have accepted that they face large losses. Recent examples include the former Chicago Daily News building at 2 N. Riverside Plaza selling for $27.75 million, far below the value of its $65 million loan, and the $45 million sale of the 65-story tower at 311 S. Wacker Drive, far below its $215 million senior loan.
Real Capital Solutions was expected to pick up the 798,782-square-foot tower at 190 S. LaSalle for far less than the value of the $167.5 million loan that lenders, including U.S. Bank, provided to building owner Beacon Capital Partners in February 2020, just before the onset of COVID-19 upturned the office market.
Boston-based Beacon, a longtime investor in Chicago office towers, bought the property for $230 million in late 2019.
The tower has continued to lose value as tenants have signed deals to move to other buildings, including major tenant Bain & Co.’s lease to move to 131 S. Dearborn St.
Beacon did not respond to requests for comment from CoStar News. U.S. Bank, which also is a tenant in the building, declined to comment.
Completed in 1987, the postmodern tower was designed by architects Philip Johnson and John Burgee.
Beacon invested $13.6 million in renovations to areas including the fitness and conference centers, lobby and cafe, according to a property brochure from Cushman & Wakefield, which began marketing the property for sale in March.
Despite falling vacancy, people familiar with the property say the property’s high quality and recently improved amenities could help it rise above the broader challenges in the center of the Loop business district.
The tower could be among properties that will get a lift from Google’s plans to own and occupy the James R. Thompson Center that is now under redevelopment.
For the record
The sellers are represented by Cushman & Wakefield brokers Tim Sitz and Cody Hundertmark.