There is no asking price for 55 W. Monroe, which Manulife subsidiary John Hancock Real Estate purchased in 2014 for $244 million, when the building was 92 percent leased. But tenant departures have left the building tenanted at 67% today, and sources familiar with the offer said they expect offers for the property to come in well under $130 million, based on other sales. of comparable downtown office buildings and the challenge of financing office building acquisitions today.
The list shows how much office building values have declined since the onset of the COVID-19 pandemic, which has fueled a remote working trend that has severely weakened demand for workspace. The record number of vacant downtown offices has hit landlords, and rapidly rising interest rates have made matters worse this year. Potential buyers are struggling to finance the business, further driving down the prices sellers can fetch.
Office real estate sales nationwide fell 8 percent year-to-date through October to $92 billion, according to data and research firm MSCI Real Assets. The past four months have been particularly slow, with double-digit percentage declines in each compared to the same period last year, company data shows.
Manulife has enjoyed several years of net cash flow from its Chicago office properties, but appears so uninterested in waiting for office demand to recover that it is willing to take major financial cuts on its office buildings.
A spokeswoman for Manulife did not comment.
Some downtown office owners whose real estate values have been crushed acknowledge they no longer have equity in their buildings and have turned them over to their lenders rather than face potential foreclosure lawsuits. That’s not an option for Manulife at 55 W. Monroe, as the company has no debt on the building, according to Cook County property records.
JLL is taking advantage of the 41-year-old tower’s large number of tenants, with 56 businesses in the building and none of them occupying more than 8 percent of the property, according to the flyer. This offers a buyer “diversification and isolation from vacancy shocks and an excessive focus on a specific tenant or sector,” the flyer said.
The Financial Industry Regulatory Authority, or FINRA, is the largest tenant, with 61,222 square feet on a lease that expires at the end of 2024, according to JLL. The building has a weighted average lease term of 2.6 years, a measure of tenants’ remaining commitments to the property.