A joint venture that includes real estate firm Hines is in the market with a US$610m green office bond, marking the second offering in this ESG format in the past three weeks.
Most of the proceeds from the five-year fixed-rate securitization, CHI Commercial Mortgage Trust 2025-SFT, are expected to refinance a US$520.5m construction loan on a top-tier office property in Chicago, known as Salesforce Tower, according to a sales document. The offering is expected to price tomorrow.
The state-of-the-art tower, located in the River North and West Loop neighborhoods, is co-owned by Hines, Diversified Real Estate Capital, AFL-CIO Building Investment Trust and Wolf Point Owners, which is part of the Park Holdings – the family office of former US president John Kennedy and his family.
The deal will fund a loan to be originated by Wells Fargo, JP Morgan and Goldman Sachs, which are the joint bookrunners.
On February 21, a Hines venture with Ivanhoe Cambridge priced a US$427.5m floating-rate green CMBS deal named TEXAS Commercial Mortgage Trust 2025-TWR, which refinanced a premier office property in Houston.
The two ESG offerings contribute to this year's revival in office single-asset single-borrower CMBS supply, which had been stifled due to elevated interest rates and soft office demand. Already US$7bn of office SASB issues have priced this year, surpassing the US$4bn for all of 2024, IFR data show.
Although challenges for the overall office sector, especially for lower-quality properties, have not dissipated, investors have become more comfortable with owning securitized debt backed by top-notch offices leased to strong tenants that signed long-term leases.
In the case of Salesforce Tower, 95% of the building is leased to two tenants: business software developer Salesforce and law firm Kirkland & Ellis. The average lease term of the two tenants is 17 years, the document shows.
As for its ESG qualifications, Salesforce Tower is LEED gold certified and is the first Chicago building to require and measure carbon emissions of concrete, steel and other construction materials, according to the document.
In addition to the building's sustainable features, a point of interest for investors is that the city's office market is on the cusp of recovery, a senior portfolio manager said. "Chicago is on the verge of pivot," he said.
Another attraction for investors is that the deal offers wider spreads than recent office SASB issues because of the spike in market volatility.
The US$373m Triple A rated tranche has guidance of US Treasuries plus 150bp area. This compares with plus 120bp on the US$218.8m senior note in a deal named RIDE 2025-SHRE, the last five-year fixed-rate office bond, which priced on February 7.