Real Estate

Namdar Acquires One North LaSalle Debt at 73% Discount Amid Chicago Office Woes

Namdar acquires One North LaSalle Street loan at 73% discount, paying under $20 million for 494,000-square-foot property.

By Tal Alexander

7/11, 11:28 EDT

Key Takeaway

  • Namdar acquired the debt for One North LaSalle Street at a 73% discount, paying under $20 million for a $74 million loan.
  • The deal positions Namdar to potentially foreclose on Bridge Investment Group, which faces financial struggles due to high vacancy rates and refinancing difficulties.
  • Chicago's office market sees increasing distressed loan note sales, with significant discounts as vacancy rates hit record lows.

Namdar's Strategic Acquisition in Chicago's Central Loop

Namdar Realty Group, in partnership with Mason Asset Management and CH Capital Group, has made a significant move in the distressed real estate market by acquiring the loan note for the landmark 47-story office property at One North LaSalle Street in Chicago's Central Loop. This acquisition, made at a steep discount of nearly 73 percent from the loan's remaining balance, positions Namdar to potentially seize the 494,000-square-foot asset from its current owner, Bridge Investment Group. This deal underscores the ongoing challenges in the office real estate market, exacerbated by the pandemic and rising interest rates.

The Details of the Acquisition

Namdar's purchase of the loan note for One North LaSalle Street involved a payment of just under $20 million, or approximately $40 per square foot. This is a significant discount from the original $74 million loan balance. Bridge Investment Group, which bought the property for $113 million in 2018, has struggled to maintain its financial viability due to declining occupancy rates and the inability to refinance the debt. The building's occupancy dropped from 76 percent in 2021 to 56 percent by December 2022, reflecting the broader trend of reduced demand for office space in the wake of the pandemic.

Chicago's Office Market Dynamics

The acquisition of distressed office properties like One North LaSalle Street is becoming increasingly common in Chicago. The city's office market is grappling with record-high vacancy rates and the impact of remote work trends. Recent data from CBRE indicates that downtown Chicago's office occupancy rate has fallen to less than 75 percent. Other notable distressed loan note sales include Maryland-based Beltway Capital's purchase of debts tied to West Loop office lofts and JLL's marketing of a $151 million loan note for 200 South Wacker. These transactions highlight the ongoing turbulence in the office real estate sector.

Implications for Office-to-Residential Conversions

Namdar's acquisition comes at a time when there is a growing interest in converting office buildings into residential units. The Central Loop, in particular, is seeing a push towards diversification from a predominantly office hub to a mixed-use neighborhood. Mayor Brandon Johnson's administration is continuing efforts to transform outdated office spaces into residential units, with $151 million in tax-increment financing allocated towards such projects. This trend is exemplified by developments at 30 North LaSalle Street and 111 West Monroe Street, which aim to create over 1,000 residential units.

Namdar's Strategic Positioning

Namdar's reputation for acquiring distressed assets positions it well to capitalize on the current market conditions. While the firm's specific plans for One North LaSalle Street remain unclear, the acquisition aligns with broader market trends of repurposing underutilized office spaces. This move could potentially involve either revitalizing the property to attract new tenants or converting it into residential units, depending on market demand and financial viability. Namdar's previous acquisition of the Louis Joliet Mall out of distress for $31 million further demonstrates its strategic approach to distressed real estate investments.