Blackstone Bids Farewell to 1.3 M SF River North, Chicago Office Property

Blackstone, the global investment firm led by CEO Stephen A. Schwarzman, is saying goodbye to a significant Chicago office complex located in the River North neighborhood after facing challenges in securing new financing.

What happened, in a nutshell: The property in question is a massive two-tower, 1.3 million-square-foot site situated at 350 North Orleans Street. This decision comes almost four months after a $310 million CMBS (Commercial Mortgage-Backed Securities) loan matured, as reported by CoStar.

Blackstone had engaged in discussions with its lender in the lead-up to the loan's July maturity date, a period that coincided with the loan being transferred to special servicing. Typically, such a transfer signals a property in distress. Despite their efforts, the landlord was unable to renegotiate a new loan with more favorable terms, leading to the conclusion that the property should be put up for sale.

Today’s taxing climate: The decision to list the property for sale comes at a challenging time for Chicago's office sector. The market is contending with historically high vacancy rates resulting from pandemic-induced remote work trends and rising interest rates. As office space continues to face difficulties, lenders are showing reluctance to issue new loans, which in turn is hindering property sales and refinancing deals within the city, as illustrated by Blackstone's situation.

In the current landscape, when office properties do change hands, they are often sold at significant discounts. In September, a significant downtown office tower was sold for the first time in over a year, with Menashe Properties acquiring a 623,000-square-foot building at 230 West Monroe Street for nearly $45 million. This sale price represented a sharp decline compared to its previous sale at $122 million in 2014.