The owner of the two-tower Prudential Plaza office complex plans to pump tens of millions of dollars into renovations as it seeks to compete for tenants in an inhospitable Chicago office market.
Wanxiang America Real Estate Group, which owns the 2.3M SF complex, negotiated a two-year loan extension with its lender, which was helped by its improvement commitments, Crain’s Chicago Business reports. The maturity date on Wanxiang’s $389M loan will extend to at least 2027. The agreement includes options to extend the maturity through 2029, Crain’s reports.
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As recently as three months ago, Kroll Bond Rating Agency had marked Wanxiang’s note as one of the three largest delinquent or distressed Chicago CMBS loans. Now, the company will spend at least $50M over the next four years to renovate the property, a figure that factors in both capital improvements and costs associated with leasing efforts, Wanxiang Managing Director Larry Krueger told Crain’s.
"We are pleased with this outcome and remain committed to Pru for the long term," Krueger told Crain’s. "Our significant infusion of capital into the property will not only allow us to continue to fully fund new and renewed leases but will also allow us to elevate the tenant and visitor experience throughout the buildings."
Negotiations were difficult because the loan was packaged with other loans and sold off to CMBS investors, which frequently makes it harder to alter loan terms, Crain’s reported.
This loan extension on a property tied to a CMBS could be a harbinger of how lenders handle a wave of similar loan maturities. Nearly a quarter of Chicago properties tied to CMBS were in some form of distress as of the fall, the highest rate in the country by a significant margin, according to the September KBRA report.
Wanxiang still had until August 2025 to pay off its mortgage on the plaza, which it purchased in 2018 for $680M, but began negotiating with special servicer CWCapital last year to extend its loan maturity date and give it more time to modernize and lease up the property, according to Crain’s. Wanxiang requested the loan's transfer to a special servicer in June, hoping to modify its terms, the Chicago Tribune reported.
The building’s improvements will center around a rooftop deck on the 11th floor of One Prudential Plaza, where Wanxiang will add a pickleball court, putting green, more landscaping and a bar area, Crain’s reported. The company will connect it to the Two Prudential Plaza tower via an enclosed glass walkway.
Additionally, the company will add a 20K SF conferencing center and entertainment area with a bar, lounge and coworking space at Two Prudential. Wanxiang will update the lobbies of both buildings with a coffee bar and lounge seating.
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