Firm has invested more than $2 billion into the iconic skyscraper since acquiring it in 2015
When Blackstone acquired Chicago’s Willis Tower for $1.3 billion in 2015, it set a record for the highest price paid for a U.S. office building outside New York City. The purchase of the 110-story skyscraper — formerly known as the Sears Tower — also sparked a long-running question across the commercial real estate industry: How would Blackstone eventually exit such a massive investment?
More than a decade later, that question has only grown more complex. Since the acquisition, the New York-based private equity firm has poured substantial capital into renovations, refinancing and repositioning efforts, likely pushing its total investment beyond $2 billion, including debt.
Market conditions have also shifted dramatically. The pandemic, the rise of remote work, higher interest rates and declining office valuations — particularly in Chicago’s downtown core — have made the prospect of achieving a multibillion-dollar sale in a noncoastal city increasingly challenging.
That challenge applies even to a 1,451-foot skyscraper that held the title of the world’s tallest building for 25 years after its completion in the early 1970s. In addition to its office component, the property includes Skydeck Chicago, a major tourist attraction generating more than $50 million annually.
In recent months, industry chatter has suggested that Blackstone has been evaluating options for the tower, including a potential sale. According to industry publication Real Estate Alert, the firm has approached select investors to assess interest in assuming more than $1.3 billion in commercial mortgage-backed securities (CMBS) debt tied to the property.
One of the primary obstacles would be the size of the transaction. If completed through a loan assumption, it would represent the largest CMBS loan assumption ever executed for a single asset, according to data from 1st Service Solutions, a Texas-based advisory firm.
“There’s a reasonableness standard involved, but it becomes extremely difficult when you’re dealing with a $1.3 billion loan,” said Stephanie Whittington, who leads loan assumptions at 1st Service Solutions. “At that level, the buyer pool narrows significantly.”
Rare air
In evaluating a loan assumption, special servicers compare the financial strength and track record of the buyer against that of the current borrower. Blackstone, widely regarded as one of the most sophisticated and well-capitalized real estate investors globally, sets a high bar.
“Blackstone is a known and trusted sponsor,” Whittington explained. “Any incoming buyer would be measured against that benchmark. If the new party isn’t as strong, the servicer may impose additional conditions on the loan.”
Blackstone has neither confirmed nor denied that it is actively pursuing an exit strategy. In a statement, a company spokesperson highlighted the success of the tower’s transformation, pointing to more than 600,000 square feet of leasing over the past two years and over 1.2 million annual Skydeck visitors.
Open for business
Despite speculation, Willis Tower is not in financial distress. Blackstone has remained current on its loan obligations, and the property continues to generate significant income.
In 2024, net operating income totaled approximately $129.8 million, comfortably exceeding the $91.4 million required to service the debt, according to CMBS data. However, because the loan carries a floating interest rate that has risen sharply in recent years, less cash flow remains after debt payments.
The property’s debt coverage ratio declined to 1.42 in 2024, compared with 2.57 at underwriting in 2018. While still above the threshold required to meet obligations, the drop reflects tighter margins.
Early last year, Blackstone negotiated a three-year extension on its $1.325 billion CMBS loan at 233 S. Wacker Drive, with options extending the maturity as far as 2030.
Beyond its initial purchase price, Blackstone has invested heavily in upgrades. Most notably, the firm spent more than $500 million expanding the tower’s base to create approximately 300,000 square feet of retail, dining and amenity space. Additional capital has gone toward elevator modernizations, infrastructure improvements and enhanced tenant amenities.
Industry estimates suggest Blackstone’s total investment in the landmark property now far exceeds $2 billion when factoring in ongoing maintenance, leasing expenses and property taxes.
The building’s roughly 4 million square feet of office space is approximately 89% leased, with tenants including United Airlines’ global headquarters. Recent leasing activity includes expansions by Dutch trading firm IMC and relocations by companies such as Adtalem Global Education and Zurich North America.
Values in flux
Determining Willis Tower’s current value is complicated by limited transaction activity in Chicago’s office market and by the building’s diverse revenue streams, including retail, broadcast antennas and the Skydeck observatory.
Following the recent loan extension, Morningstar Credit reported that the tower’s appraised value had fallen to $1.03 billion — below the outstanding loan balance and well under its $1.78 billion valuation at refinancing in 2018. However, Morningstar DBRS later indicated that including the Skydeck business as a going concern would lift the valuation to more than $1.4 billion, with projections of $1.63 billion by 2027.
Even so, many industry observers believe it would be difficult to secure a buyer willing to pay enough to cover the full loan balance in today’s market.
Observatory windfall
The Skydeck observatory remains a significant revenue driver. An appraisal valued the observatory business at $420.1 million, though only $47.9 million of that amount reflects underlying real estate value. In 2024, the observatory generated more than $52.5 million in revenue — over 20% of the property’s total income — and accounted for more than 29% of net operating income.
Broadcast antenna leases have contributed between roughly $9.9 million and $11.5 million annually in recent years, further diversifying income.
Few peers
As the world’s largest private-equity owner of commercial real estate, Blackstone itself is among the limited group of investors capable of acquiring assets of this scale. That reality narrows the universe of potential buyers for a one-of-a-kind property like Willis Tower.
While landmark status and unique characteristics could attract institutional or international capital, the broader challenges facing the U.S. office sector continue to weigh on valuations and liquidity.
Alternative strategies could include contributing the asset to a publicly traded REIT, selling partial interests, forming joint ventures or separating components such as retail, office, observatory and antenna operations into distinct transactions.
Handing the property back to lenders — a path Blackstone has taken with other office assets in Chicago and Manhattan — is another theoretical option, though doing so with a globally recognized landmark could carry reputational consequences.
Ultimately, industry experts say Blackstone may need a creative solution to bridge the pricing gap in a market where buyers remain highly selective and focused on repositioning potential.
Source: Original reporting by Ryan Ori, CoStar News.
