Golub & Co. is the latest office landlord looking to sell a Loop property, even if it means a loss on its investment.
Nearly four years after CoStar acquired the 584,000-square-foot building for $80.3 million, a joint venture spearheaded by the Chicago-based firm has hired Cushman & Wakefield to sell its historic 22 at 111 West Washington Street. Leasehold interest in the Burnham Center Report.
It’s unclear how much Golub hopes to get in a sale, but it could be less than what it paid in 2019. The remote working movement sparked by the pandemic has hit Chicago’s office sector hard, leading to a record vacancy rate above last quarter’s 22%. More recently, high interest rates have exacerbated the problem, further depressing commercial real estate values.
However, Cushman & Wakefield is exaggerating the “Google effect”. The tech giant announced last year that it would move into the James R. Thompson Center in 2026, which could revive the Loop’s struggling office market. The Burnham Center is also home to the headquarters of GrubHub, a 164,100-square-foot food delivery platform. Additionally, Crain’s reports that Cushman’s Cody Hundertmark testified that GrubHub’s employees return to the office about three days a week.
Still, the building is struggling to stay afloat financially. It currently sits at just under 65% occupancy after losing several tenants (including Chicago film school Flashpoint).
The Golub venture received a $75.4 million loan from CIT Group to finance its acquisition, which included only a leasehold interest in the building, while the independent Pennsylvania-based Alliance HSP retained control of the ground beneath the structure. Golub Enterprises pays Alliance land rent.The capital structure involving ground leases is also starting to cause headaches for landlords of other downtown Chicago office properties, including 55 East Jackson Avenue and 300 South Riverside Plazaproperty owners face the prospect of defaulting on large loans related to land leases.
Selling Burnham Center may not generate enough cash to service debt. It is also possible that Golub will eventually pull the listing off the market.
It was completed in 1914 and named after its famous architect, Daniel Burnham.
— Quinn Donoghue