Bloomberg News

Goldman Unit Said in Talks to Give Up Chicago Tower to NorthStar

February 21, 2012

Feb. 11 (Bloomberg) -- NorthStar Realty Finance Corp. is in talks to seize Chicago’s John Hancock Center from owners including Goldman Sachs Group Inc.’s Whitehall real estate unit, according to two people with knowledge of the discussions.

The New York-based commercial property lender and investor owns junior debt on the building, Chicago’s fourth-tallest, said the people, who asked not to be identified because the talks are private. The $182 million mortgage on the property yesterday was transferred to a firm that specializes in troubled loans after the borrowers defaulted, according to Fitch Ratings.

The loan, packaged into bonds, was part of about $400 million in debt that Whitehall and Golub & Co. used to finance their purchase of the 100-story property in January 2007, near the market’s peak. The loans came due on Feb. 9.

Buying slices of lower-ranking debt to take ownership of commercial properties has become a common strategy as defaults surge. Borrowers are struggling to refinance loans made during the bubble years of 2005 to 2007, allowing investors to get hold of marquee buildings through junior-debt purchases.

Michael DuVally, a spokesman for New York-based Goldman, and Mary Ellen Smith, director of marketing for Chicago-based Golub, both declined to comment. Joe Calabrese, a spokesman for NorthStar, didn’t respond yesterday to an e-mail and telephone call seeking comment.

Blackstone Loan Purchase

NorthStar probably will prevail over other junior creditors who were considering bids for control of John Hancock Center, said the people familiar with the negotiations. Blackstone Group LP this month bought a junior loan on the building with a face value of about $65 million from a Morgan Stanley unit, according to one of the people.

Peter Rose, a Blackstone spokesman, said he had no comment yesterday.

The building is 1,128 feet (344 meters) tall, fourth in height in Chicago after Willis Tower, formerly known as Sears Tower; Trump International Hotel & Tower Chicago and the Aon Center, according to the Chicago-based Council on Tall Buildings and Urban Habitat.

John Hancock Center was the third tower in the world to surpass 1,000 feet when it was built, following the Chrysler Building and Empire State Building in Manhattan, according to property-data provider Emporis GmbH. The property, at 875 North Michigan Ave., is in the Magnificent Mile area of Chicago, known for its shopping and high-end hotels.

--Editors: Daniel Taub, Christine Maurus

To contact the reporters on this story: Hui-yong Yu in Seattle at; Sarah Mulholland in New York at

To contact the editor responsible for this story: Daniel Taub at

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