Irvine Co. continues to spend heavily on its expansive national office portfolio, with a major cash outlay reported for one of the three skyscrapers it owns in downtown Chicago.
The Newport Beach-based landlord, which counts an office portfolio running about 54 million square feet, last month confirmed that it paid off the debt for 300 N. LaSalle, a 60-story office tower in Chicago’s River North district.
Irvine Co. paid a reported $850 million for the tower in 2014. That deal was reportedly backed by a 10-year, $475 million loan originated by Bank of America.
The landlord didn’t say how much was still outstanding on the loan, though a report in Crain’s Chicago Business pegged the amount at $431 million. Irvine Co. retired the loan because it was due.
The company said that in addition to retiring the loan, which reportedly carried an interest rate just under 4%, it plans to invest $30 million to renovate portions of the building, including the three-floor lobby.
Windy City Record
Houston-based developer Hines built the 60-floor high-rise, located on the banks of the Chicago River, in 2009. Five years later, Irvine Co.’s purchase of the building was reported at the time to be the most expensive single-building office transaction ever for Irvine Co., or for any Orange County company, for that matter.
The $850 million price tag was also the most paid for a Chicago office building, with Irvine Co. paying $10 million more than the previous record – the $840 million purchase of the 110-floor Willis Tower in the Windy City’s central business district.
Irvine Co. had two other investments in the Chicago area. It bought the 51-floor UBS Tower in 2011 for a reported $310 million and owns the 48-floor Hyatt Center office tower, acquired in 2010 for a reported $625 million.
Leasing Success
An Irvine Co. statement about the Chicago debt payment said the Newport Beach-based company leased more than 650,000 square feet of office space in Chicago and 10.4 million square feet across its portfolio, between July 1, 2023, and June 30.
“This demand has brought its overall portfolio in Chicago, Orange County, Los Angeles, Silicon Valley and New York to more than 90% leased,” the Irvine Co. said.
The firm is the largest owner of office space in both Orange County and the state of California.
Outside the state, its office holdings are in Chicago and New York City, where it has its largest single-building office property, the MetLife Building, a 3.1 million-square-foot office tower at 200 Park Ave. in New York City.
Irvine Co. took over full ownership of the MetLife skyscraper earlier this summer, buying out a minority partner. The landlord has spent an additional $200 million renovating the New York tower the past few years, it said.
Counter Trend
Irvine Co.’s decision to invest heavily in its Chicago and New York towers runs counter to prevailing trends in the national office market, with news of distressed loans increasing amid post-pandemic declines in office occupancy rates, falling building valuations and high interest rates.
As of a few months ago, over $38 billion of U.S. office buildings faced defaults, foreclosures or other forms of distress, according to data firm MSCI. That “is the highest amount since the fourth quarter of 2012 in the aftermath of the 2008-2009 financial crisis,” noted a report in the Wall Street Journal.
That WSJ report noted that office tenants “signing new leases are closely scrutinizing their landlords’ financial health. They want to be sure the owner isn’t going to lose its property to creditors and has the money to add promised amenities.”
Irvine Co. Chairman Donald Bren is the wealthiest real estate owner in the U.S., with a fortune the Business Journal estimates at $18.3 billion.
At least four other billionaires, including Olen Properties’ Igor Olenicoff and the founders of Corona-based Monster Beverage Co., count significant office holdings in Orange County, reducing the likelihood of the county’s feeling as big a downturn in fortunes as other office markets.
Companies are drawn to Irvine Co. “for our premium workplaces, personalized service and industry-leading financial stability,” Office Division President Roger DeWames said in a statement.
“Our 2023 leasing activity highlights the continued flight to quality in the market and the ever-growing importance of choosing not only where your company works, but who your landlord is.”
