Blackstone Lists Struggling River North Office For Sale
Blackstone is parting ways with a massive Chicago office complex in the River North neighborhood after failing to secure new financing.
The investment firm led by CEO Stephen A. Schwarzman has hired JLL brokers to sell the two-tower, 1.3 million-square-foot property at 350 North Orleans Street, almost four months after its $310 million CMBS loan matured, CoStar reported.
Blackstone was in talks with its lender prior to the July maturity date, around the time when the loan was transferred to special servicing — a move that usually denotes a struggling property. The landlord was ultimately unable to negotiate a new loan with more favorable terms, thus prompting the decision to sell.
“The property is experiencing the well-known headwinds facing U.S. traditional office buildings lacking first class modern amenities and this location in the River North submarket has been particularly challenging, which is why we effectively wrote this investment down to zero last year,” a Blackstone spokesperson said.
The listing comes at a dismal time for Chicago’s office sector, which is grappling with record-high vacancies stemming from pandemic-driven remote work trends and rising interest rates. And as office struggles persist, lenders are reluctant to dish out new loans, hindering sales and refinancing deals in the city, as reflected with Blackstone’s situation.
These days, when office properties do change hands, they’re often sold at a steep discount. Other prominent office buildings, such as the Chicago Board of Trade Building, the Civic Opera Building and 150 North Michigan Avenue are also expected to be sold at significant discounts or have already been given up by their owners and taken over by their lenders.
In September, a major downtown office tower traded for the first time in over a year, as Menashe Properties paid nearly $45 million for the 623,000-square-foot building at 230 West Monroe Street. That’s a staggeringly low amount given that it last sold for $122 million in 2014.
“What you own matters, and US traditional office represents less than 2 percent of our global portfolio today versus more than 60 percent in 2007. We intentionally pivoted toward sectors like logistics and data centers, which are benefitting from exceptionally strong macro-tailwinds and supply/demand fundamentals.”
Blackstone purchased 350 North Orleans for $378 million in 2015 and secured the $310 million loan from Goldman Sachs in 2018, the outlet reported. The property has an occupancy rate of 65 percent, down from the city average of roughly 76 percent.
Blackstone spent $104 million to renovate the site, a project that was completed in 2020. JLL is playing up the listing as an opportunity to acquire an amenity-filled property at a relatively low price.
— Quinn Donoghue
Editor’s note: This story has been updated to add a statement from Blackstone.
