GSN Roundup: Utility-Bond Reclassifications and JPMorgan Office Refi in Chicago

Top stories in US CRE News this week:

Asset Backed Alert 11.21.25 
Utility-Bond Reclassification Fight Heats Up 

Spurred by an SEC move to revisit its securitization disclosure rules, a state governor, joined by several state regulators, is again asking the agency to reverse its decision classifying utility-fee bonds as asset-backed securities rather than corporate debt. 

Colorado Gov. Jared Polis made the request via a Nov. 10 letter that also was signed by regulators from his and two other states, as well as by David Springe, executive director of the National Association of State Utility Consumer Advocates. It was at least Polis’ second such missive, following a similar letter he and the governors of seven states sent the agency in September 2024.  

As with past such efforts, the latest letter focuses on a tendency among asset-backed bonds to price at higher interest rates than corporate bonds with similar tenures and ratings, a factor the officials called “an interest rate penalty on billions of dollars in bonds and millions of Americans’ electric bills.” 

The writers said they felt compelled to reaffirm their concerns after the SEC on Sept. 26 published a so-called concept release to solicit comments on whether to amend its asset-level disclosure requirements for residential mortgage-backed securities and whether to revise its definition of asset-backed securities and/or other definitions in its Regulation AB disclosure rules. In July 2024, the SEC’s Division of Corporation Finance said utility-fee bonds meet the definition of asset-backed securities under Regulation AB. 

According to the letter, the concept release includes statements characterizing utility bonds as asset-backed securities and suggests that the SEC has treated such securities as asset-backed bonds for many years, “when, in fact, the opposite is true and the [SEC’s staff] has only recently sought to reclassify [utility-fee bonds] as ABS.” 

“For the reasons set out in this letter, we respectfully submit that these conclusory statements are without foundation and this account of regulatory actions in this space is selective, materially inaccurate and incomplete,” the letter states. 

Polis, Springe and the regulators are asking for a meeting with the SEC to discuss the matter. Comments on the agency’s concept release are due by Dec. 1. 

States have long maintained that such instruments should be treated as corporate bonds because carriers’ customers repay them via special charges added to their electricity bills, meaning that they also absorb increases in debt-servicing costs.  

Following SEC staff meetings with state representatives in December, the latter felt that a reversal of the agency’s definition could be in the offing. That changed in May, however, when the staff unexpectedly concluded that the matter was settled in part because the agency had granted utility-fee securitizations an exemption from risk-retention rules that require issuers of asset-backed bonds to retain 5% of their deals under the Dodd-Frank Act. “As best we can tell, the staff has adopted the view that the SEC’s action to create an exemption supplants the need to establish how [utility-fee bonds] meet the definitions of ABS in the first instance,” the letter states. 

The letter also contends that the SEC has never formalized a rule or regulation on the classification of utility-fee bonds, and that its interpretations came without notice or a public comment period. They argue that the interpretation failed to consider the effect on energy companies’ customers. 

The battle over the definition of the bonds began heating up following a 2022 reclassification of such securities as asset-backed bonds by Bloomberg, which prompted lawsuits by the Electric Reliability Council of Texas, Pacific Gas and Electric and Southern California Edison. 

Previous SEC guidance came via a 2007 no-action letter to West Virginia regulators in which the agency said certain kinds of utility-fee bonds were corporate debt, and not asset-backed products. And in 2007, FirstEnergy units Monongahela Power and Potomac Edison obtained a no-action letter from the SEC stating that the agency did not consider their utility-fee bonds to be asset-backed securities. In addition, the regulator has allowed issuers to register their offerings using paperwork for corporate debt. 

Energy companies use proceeds from securitizations to recoup costs related to natural disasters, to retire coal-fired plants and to fund environmental upgrades. State legislators grant the operations the rights to bill the collateral fees to customers while pledging not to interfere with their collections. 

Mitigating risks to bondholders are periodic fee adjustments under so-called true-up mechanisms intended to ensure the fees are sufficient to pay principal and interest. 

Issuers have priced nine utility-fee securitizations so far this year totaling $4.0 billion, according to Asset-Backed Alert’s ABS Database. Last year, utility companies printed eight such offerings adding up to $5.8 billion. 

Commercial Mortgage Alert 11.21.25 
JPMorgan Leading $700M Chicago Office Refi 

JPMorgan Chase, Bank of America, Wells Fargo, Bank of Montreal and Goldman Sachs are on track to originate $700 million of fixed-rate debt on a trophy office tower in Chicago’s West Loop neighborhood. 

The 1.5 million sq ft Bank of America Tower, at 110 North Wacker Drive, is owned by a joint venture between Callahan Capital Partners, which has its headquarters in the 57-story building, New York-based Oak Hill Advisors and Affinius Capital, of San Antonio. 

Newmark is advising the partnership on the pending refinancing. JPMorgan, which is leading the deal, intends to fund 40% of the balance. BofA and Wells each would take down 20%, while BMO and Goldman Sachs would split the remaining 20%. 

The banks plan to securitize the five-year, interest-only debt via a single-borrower CMBS offering that’s expected to price within the next two weeks (CHI 2025-110W). 

The borrower would use $556.1 million of the proceeds to retire the amount due on a balance-sheet mortgage that BofA, JPMorgan and Wells provided in March 2022. That floating-rate loan, totaling $560 million at origination, had an initial term of three years, plus two one-year extension options. 

After paying off $129.8 million of preferred equity, the owners would deploy the remaining proceeds from the new loan to cover an estimated $11.4 million of closing costs and $2.7 million of reserves. 

The collateral property was appraised in January at slightly over $1.0 billion, pegging the loan-to-value ratio for the new financing at 69.5%. The projected debt yield would be 10.2%, based on underwritten net operating income of $71.1 million. The anticipated debt-service coverage ratio would be 1.60 to 1, reflecting underwritten net cashflow of $67.8 million. 

The LEED-gold-designated building is 97.8% leased to 38 tenants under agreements with a weighted average remaining term of 9.4 years. About 64% of its $65.1 million of underwritten base rent can be attributed to eight companies with investment-grade ratings or listings on The American Lawyer magazine’s annual ranking of the top 50 U.S. law firms. 

The largest occupant, BofA, has a lease on 532,000 sq ft that expires in September 2035, accounting for $21.3 million, or 32.8%, of the property’s base rent. Other major tenants include law firms Jones Day (119,000 sq ft until September 2037) and Perkins Coie (104,000 sq ft until June 2036) and investment bank Lincoln International (89,000 sq ft until November 2034). Jones Day contributes $5.6 million (8.6%) of base rent, followed by Lincoln ($4.4 million, 6.8%) and Perkins Coie ($4.3 million, 6.6%). 

The property was developed in 2018 through 2020 by Howard Hughes Corp. of The Woodlands, Texas, and local firm Riverside Investment & Development. They co-owned it with Affinius, then known as USAA Real Estate, until selling their stake to Callahan and Oak Hill for $208.6 million in 2022, according to Green Street’s Sales Comps Database. 

The outstanding senior mortgage was originated in conjunction with that 2022 recapitalization. The current size of the stake held by each member of the ownership group could not be learned. 

The building is at the northwest corner of North Wacker Drive and West Washington Street, two blocks south of the confluence of the Chicago River’s three branches.