Spear Street Gets A Discount On Loop Office Tower Due To Coronavirus Worries
Spear Street Capital completed its purchase of 225 West Wacker Drive, a 651K SF tower on the Chicago River, and ended up getting a little knocked off the original price. The San Francisco-based investor first struck a $220M deal in March, but the seller, South Korea-based Mirae Asset Global Investments, eventually settled for $210M in cash, according to Real Estate Alert, which first reported the transaction.
Even at that 5% discount, it is Chicago’s largest trade since the onset of pandemic and sets off its office market from most others around the U.S., where significant sales dropped to zero.
“Many pending trades have fallen apart over the past two months, as buyers reassessed the risk profiles of commercial properties — and struggled to secure financing, with lenders largely sitting on the sidelines,” Real Estate Alert said.
But Spear Street is accustomed to placing big bets on the Chicago market’s long-term viability. In October, even as many investors were avoiding Chicago due to fears that commercial property taxes were set to rise, the company bought 500 West Monroe St. from Piedmont Office Realty Trust for $412M, the costliest Midwest transaction in 2019, according to CommercialCafé.com, beating out Starwood Property Trust’s purchase of Minneapolis’ Wells Fargo Tower by nearly $100M.
Tenants leased 96% of 225 West Wacker when marketing began, but occupancy will drop to 70% in 2021 after several tenants move out, according to Cushman & Wakefield, which has its headquarters in the building and represented Mirae in the sale. Mirae bought 225 West Wacker in 2013 from J.P. Morgan Asset Management for $218M.