Wanxiang Extends Pru Plaza Loan to Upgrade Chicago Complex

Wanxiang America Real Estate Group, the Chicago-based CRE investment arm of Chinese auto parts maker Wanxiang Group, is betting on a recovery of the office market in downtown Chicago.

Wanxiang has secured a two-year extension of its $389M mortgage on the 2.3M SF Prudential Plaza office complex, pushing the due date to 2027 with an option to extend through 2029.

The extension was the result of talks with its lender, CW Capital to modify the loan terms on the debt for Wanxiang’s 2018 purchase of the Pru Plaza office campus at 130 Randolph Street for $680M, Crain’s reported.

As a result of the financial restructuring, Wanxiang is planning to invest more than $50M to upgrade the 2.3M SF office complex to “elevate the tenant and visitor experience throughout the buildings,” a Wanxiang managing director said, in the report.

The renovations will include the installation of a rooftop deck on the 11th floor of One Prudential Plaza. The deck will provide access to a new enclosed glass walkway to Two Prudential Plaza, which also will be adding a 20K SF conference center, including a bar and a lounge.

Downtown Chicago experienced what one market report called “green shoots of optimism” in 2023 as annual lease transaction volume surged to 8.2M SF, up from 5.2% in 2022. Leasing activity grew to 2M SF in the fourth quarter, up from 1.7M SF in Q3.

The office availability rate is approaching 28%, but according to a Q4 2023 market report from Savills, availability appears to be “flattening” as workers gradually return to downtown.

Available sublease space ticked up in the fourth quarter to 7.9 M SF as tenants increasingly recalibrated their office requirements.

The increase in sublease space was notched despite the largest sublease deal of the year in the fourth quarter, OneDigital’s agreement to take two full floors encompassing 104K SF from Willis Tower Watson at the Willis Tower.

Overall downtown asking rents trended lower to $43.11 per SF at the end of the year, driven by what Savills said was slashed pricing at Class B properties. Class A rents average 50.37 per SF. Negotiated rents remained lowered across all asset classes, except for trophy properties, in 2023, while landlord concessions were elevated across most properties.

“Tenant favorable market conditions will likely prevail for the foreseeable future,” Savills report said.