A real estate firm known more for lending than investing has a deal to buy Cushman & Wakefield’s global headquarters tower in Chicago for about $120 million, one of the highest-priced deals in the city in recent years.
San Francisco-based Prime Finance has a preliminary agreement to buy the 31-story building at 225 W. Wacker Drive, according to people familiar with the situation.
The deal has not been completed and still could fall apart in a challenging time for office investment sales nationally.
If the deal is completed as expected, it would represent one of the highest prices for an office tower in recent years in the nation’s third-largest city. Yet it would fall short of the amount needed for seller Spear Street Capital to pay off its loan.
Spear Street, also based in San Francisco, bought the tower in the Loop business district for $210 million in May 2020, soon after the arrival of COVID-19 disrupted office usage in downtowns throughout the country.
The firm took out a $158.1 million loan from RBC Real Estate Corp. about two months later, an amount that was paid down to $143.1 million in a 2023 modification, according to Cook County property records.
Spear Street and the bank had hoped that the high-quality building, completed in 1989, would attract offers large enough to pay off most of the debt.
The bank and Spear Street did not immediately respond to requests for comment from CoStar News. Prime Finance also did not respond.
Prime Finance is not affiliated with Chicago real estate veteran Mike Reschke’s Prime Group, a prolific buyer and redeveloper of downtown Chicago buildings.
Lender rarely makes purchases
Prime Finance is a frequent lender on commercial real estate such as office towers. Less often, the firm buys properties.
That was the case last year when Prime Finance teamed up with local firm MRP Realty to buy a four-property office portfolio in Bethesda, Maryland, after the previous owner defaulted on its debt.
It’s unclear whether Prime Finance is partnering with any investors on the Chicago deal.
CoStar News first reported in February that Cushman & Wakefield brokers had been hired to find a buyer for the property.
The 650,812-square-foot building was 86% leased with a weighted average lease term of 6.5 years at the time it hit the market, according to a property brochure from the brokerage.
Cushman & Wakefield is the largest tenant, leasing just over 83,000 square feet for its Chicago office and global headquarters operation.
The property has received upgrades to the lobby, amenities, common areas and building systems since 2020, according to the Cushman & Wakefield materials, which say the average tenant size is 18,050 square feet.
Distressed trades shape office sales
Most office sales in Chicago in recent years have been high-vacancy properties in financial distress.
That includes the 46-story tower at 500 W. Monroe St. that Spear Street bought for $412 million in October 2019. After Spear Street’s $270 million loan on the property matured last year, lender JPMorgan Chase hired JLL brokers to sell the note, with the buyer expected to take possession via a deed in lieu of foreclosure.
CoStar News reported in March that Chicago-based Glenstar and a Minnesota investor have a deal to buy the tower for between $100 million and $110 million.
With those two sales pending in Chicago, Spear Street also is poised to buy a smaller office building at 1201 W. Lake St. in Fulton Market west of the Loop for $40 million.
For the record
The seller is represented by Cushman & Wakefield brokers Tom Sitz, Cody Hundertmark, Jeremiah Olsen and Kelsey Berry.