10/19/2012

Werner Venture Seeks Loan for Chicago Deal

The prospective buyer of a trophy office building in Chicago is shopping for a $250 million loan to finance the deal.

A joint venture between syndicator David Werner and investor Joseph Mizrachi has agreed to buy the 1.1 million-square-foot property, at 540 West Madison Street, from Bank of America for about $345 million. The partnership prefers a five-year, interest-only loan. It will consider both fixed- and floating-rate proposals, aiming for an interest rate of around 4%.

A $250 million mortgage would represent about 72% of the purchase price. But sources said the buyer will put up capital for tenant improvements and leasing expenses that will raise its investment to nearly $400 million, putting the loan-to-cost ratio at roughly 65%.

The assignment is being pitched to commercial MBS lenders, banks and insurance companies via broker Jones Lang LaSalle. The buzz is that the buyers want to line up the financing quickly and are looking for a lender that can nail down an agreement within a few weeks. Jones Lang declined to comment.

The Werner-Mizrachi team came out on top in competitive bidding for the building, which is 91% occupied, mostly by BofA. Itís the latest in a series of sale-leaseback deals struck by the bank, which is looking to shed its real estate holdings. BofA will sign a 10-year, triple-net lease on 757,000 sf, or 69% of the total space, at a rent of $25.53/sf ó but it will have the option to vacate 400,000 sf within a few years. The other tenants are DRW Trading and Marsh & McLennan.

The deal would be the largest commercial-property trade so far this year in Chicago. Along with the 31-story building, the property encompasses an adjacent development site that has been approved for a mirror-image tower.

Werner and Mizrachi, both based in New York, have teamed up in Chicago before. In 2010 they bought the 1 million-sf office building at 300 South Riverside Plaza from Brookfield Asset Management of Toronto for $190 million. They lined up a $119.9 million loan from UBS with a 5.43% coupon. The five-year mortgage, which has performed well, was securitized in a $2.2 billion pooled deal (DBUBS Mortgage Trust, 2011-LC1).

Back Print