Real estate investor Phil Denny has a problem. One of his anchor tenants, the photo and video production arm of Crate & Barrel, just left his 80,000-square-foot building on the outskirts of Fulton Market. And the $12.5 million loan on the three-story property at 240 N. Ashland Avenue recently transferred to a Miami-based special servicer, according to Crain’s.
Denny, whose company Peppercorn owns about 25 properties in the West Loop and the city’s Near West Side, told Crain’s that he wasn’t worried about losing the property to a default.
But if tenants at several other properties don’t pay rent in the next few months, he’ll face a serious cash crunch. “We’re preparing for a situation where the demand is so much less that it might be a challenge to carry the buildings for a prolonged period of time,” Denny, who has embraced the moniker “The King of the West Loop,” told the outlet. “That, in my opinion, warranted getting to know the special servicer and getting their opinion.”
Denny’s situation could be a preview of what’s to come for many owners of commercial property in Chicago, as the economic shutdown continues to depress rental collection rates, while mortgage payments pile up, and the prospect of finding new tenants remains slim.
Peppercorn bought the building in 2008 for $13 million and took a $12.5 million loan out in 2015, which was bundled with other loans as part of a commercial mortgage-backed security. Denny tried to sell the property in 2018 as an Opportunity Zone play, but found no takers. Crate & Barrel signed a lease in early 2018 to move to Logan Square.
LNR Partners was appointed as the special servicer to represent CMBS investors. [Crain’s] — James Kleimann