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Chicago landlord bought the 123-year-old, 198,000 sf building for $23M in 2013
Maybe a third time will be the charm for longtime Chicago landlord Marc Realty.
The firm, headed by Gerald Nudo and Elliot and Larry Weiner, is in danger of losing the vintage Loop office building at 216 West Jackson Boulevard to its bondholders. A $16.5 million commercial mortgage-backed securities loan is facing a foreclosure lawsuit that was filed late last month in Cook County court.
The complaint alleges that Marc defaulted on the loan by failing to pay back more than $14 million as it came due in the fall last year. A special servicer was appointed to oversee the 10-story, 198,000-square-foot property last year as its financial performance plummeted amid the pandemic.
Neither Marc did not return a request for comment. The attorneys representing the bondholders who filed the lawsuit referred The Real Deal to LNR Partners, which has not yet returned a request for comment.
The asset’s potential distress is the latest instance of Loop office landlords getting pummeled with complaints from lenders, a wave caused by the pandemic sapping commercial real estate demand and office players’ inability to refinance due to rising interest rates. Multiple aging LaSalle Street properties are in financial distress, as well, and lenders have recently moved to foreclose on big players such as New York-based AmTrust Real Estate at 30 North LaSalle.
Marc put the Jackson Boulevard property up for sale in February 2020, right after its largest tenant at the time, financial services company Marex Spectron, vacated about 40,000 square feet, and right before the pandemic rocked commercial real estate.
It never traded hands and Marc was stuck with a Class C office property first built prior to 1900 that continued to empty as the health crisis dragged on. More than half of the building appears to be vacant today, according to a LoopNet listing showing about 120,000 square feet of available space. That’s more than double the 19.5 percent vacancy average for Class C offices in the city.
A hearing on whether a receiver should be appointed for the property while the lawsuit plays out is scheduled for Tuesday morning, records show.
When Marc bought the property for $23 million in 2013 — six years after the firm sold it following eight years of ownership — the building was close to fully leased, and brought in nearly $2 million annually in net cash flow from 2014 through the end of 2020, according to a DBRS Morningstar report on the loan. That income has since fallen to about $500,000 annually.
The building’s entire remaining tenant roster has lease expirations approaching in the next 14 months, according to Morningstar.
Although Marc never found a buyer when the building was on the market at the start of the pandemic, investors do have another opportunity to buy an older Loop building that also lost its largest tenant, and it is right across the street from 216 West Jackson. The Miami-based Market Street Partners hired CBRE to market the 144,000-square-foot building at 209 West Jackson. ADP moved out of its 24,000-square-foot space in July of 2021.
Marc is also selling the office building at 180 North Michigan Avenue, which is expected to draw bids for around $30 million from developers who might consider turning it into a multifamily asset.