Chicago Real Estate News from Bisnow

As Golub & Co and Goldman Sachs’ Whitehall real estate fund scramble to refinance $400M in boom era debt on the iconic Hancock Tower that comes due this month, investors are circling. Is this a replay of the Boston Hancock takeover?

With an eye on the $100M mezz piece, the Blackstone Group may try to buy into the capital stack and eventually assume ownership of the trophy, Bloomberg reported recently. Calls to Blackstone and Golub were not returned. But that strategy worked with the John Hancock Tower in Boston for affiliates of Normandy Real Estate and Five Mile Capital (an owner of the IBM Building at 330 N. Wabash). Starting in '08, Normandy began to purchase the debt. In ‘09, it bought the JHT (then 20% vacant) for $630M. After renovating and leasing, it sold for $930M to Boston Properties in late '10.

Chicago will have its share of distress office sales as owners who financed richly priced properties prior to ‘08 face refinancing difficulties, says Morningstar director of REIT research Philip Martin. The CMBS market isn’t fully functioning and during underwriting, the tower will be marked to market. The Hancock, out of the Loop, may have some difficulty attracting new tenants. As an older tower, it may require substantial capital expenditures to lease competitively. But a large private equity fund like Blackstone, with full pockets and a focus on CRE, may like this trophy and its potential for consistent long-term cash flow. Only a few REITS could handle such a large deal. Then, there’s the still struggling office market.

As Hancock Tower leases roll over, new leases are likely to be signed at a lower rent, says CBRE Econometric Advisors’ senior managing economist Art Jones. The Chicago market is stabilizing from the recession, but isn’t back to where it was during the boom. It lost 4.3M SF of leases in ’09 and ’10. Rents declined at the end of ’11 and are now 11% lower than they were in late ’08. The vacancy rate (including sublease space) is up to 13.7%, compared to 10.8% in Q3 ’08. Overall, says Art, the office market is clearly weaker than it was four years ago.

Undistress: RATIO/DeStefano Mix

Finally, RATIO Architects’ founding principal Bill Browne will open a Chicago office this month. He found his long sought entry into Chicago when DeStefano disbanded a few months ago. Thirteen of its people joined Bill's Indianapolis-based firm. This month, they’ll set up shop at 401 E. Illinois St. Scott Sarver and Dae-Hong Minn, former DeStefano principals, will be managing principals for the new outfit known as SMDP. They’ll focus on international work and, as consulting principals for RATIO, will also snag Chicago commissions. Now, they’re designing a new downtown office building to be the HQ for a corporation Bill can’t name. He also hopes to do projects for higher ed, cultural institutions, and perhaps the convention sector.

Hopefully Scott, snapped at the Super Bowl Village on Georgia Street that Ratio designed and is debuting this week in advance of Sunday’s game, will have some time for All American fun. He deserves it after he and Dae-Hong worked for years to complete the 1,800-unit, triple tower luxury residence in Busan, S Korea. The first residents arrived in December at the Doosan Haeundae Zenith Towers. In Xian, China, RATIO is doing landscape design and infrastructure planning at the waterfront.

RATIO’s Gerogia Street design team: Brian Staresnick, Joe Fischer, John Jackson, Ben Ross, Tom Gallagher, Ken Boyce, Jennifer Higginbotham, and Jeremy Schwer. Georgia Street is a permanent attraction that links the Indianapolis’ convention center and Banker's Life Fieldhouse, the Pacers' home. It’s all about food, music, and drink.

Softball Season Somewhere

Crossing home after monster home run, Mid-America's Peter Caruso shows 'em how it's done at the Downtown Real Estate Softball League's winter classic last weekend. Contenders also included: JLL, MB Real Estate, CBRE, Bradford Allen, and Golub & Co. Perhaps in a sign of things to come, Golub came out on top with a 3-0 win. Also, in a tie, Golub unseated Klein Corporate Realty, says League commissioner and Klein principal, a gracious Richie Klein.