55-story Chicago tower valued at over $1 billion after Oak Hill Advisors purchase

A venture led by Oak Hill Advisors has agreed to buy a controlling interest in a new 55-story office tower in Chicago in the latest sign that investors are paying up for modern, amenity-rich office buildings despite uncertainty over the return-to-office. 

Oak Hill has agreed to buy 110 North Wacker Drive from Howard Hughes Corp. in a deal that values the 1.5-million-square-foot skyscraper at more than $1 billion, according to people familiar with the matter. That would be the highest price paid for a Chicago property building since the beginning of the pandemic. 

The deal, which is scheduled to close next year, comes as the office building industry is being split into a world of haves and have-nots by the pandemic’s work-from-home trend. Owners of trophy space with great views and state-of-the-art air filtration have been attracting tenants looking for ways to lure their workers back to offices. 

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But leasing volume remains anemic for more ordinary space, especially as the Omicron variant delays return-to-office plans. Demand may not return to pre-pandemic levels even after the Covid-19 virus is tamed because many businesses are adopting "hybrid" workplace strategies that allow employees to work from home part of the time. 

Located on the Chicago River, 110 N. Wacker opened in October 2020 with a 45-foot lobby, numerous dining options and a secondary air-filtration system that was added during the pandemic. The space is over 85% leased by tenants including Bank of America and the law firm Morgan Lewis. 

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Howard Hughes, a real-estate development company with roots dating back to the storied pilot and business tycoon, decided in 2019 to put noncore assets up for sale. Earlier this year, the company hired the Chicago office of Eastdil Secured LLC to market 110 N. Wacker as part of that program. 

"We’re going to wait for the right price, not the first price," said David O’Reilly, Howard Huges chief executive, on an earnings call with analysts in November. 

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Other trophy office properties also are fetching high prices. For example, Blackstone Inc. is in advanced talks to acquire a 49% stake in a two-year-old New York office tower named One Manhattan West in a deal that values the skyscraper at $2.85 billion. 

Oak Hill has been an active buyer of commercial property since it formed a new real-estate unit last year headed by Matt Bornstein, the former global head of Deutsche Bank’s commercial real-estate business. 

This article first appeared in the Wall Street Journal