Lender snags Rampante’s empty Loop offices in foreclosure

Rampante Realty is set to lose control of landmark Chicago Loop office building after a special servicer for a lender seeking to foreclose made a winning $20 million bid at a court-ordered sale of the asset.

The special servicer, CWCapital Asset Management, submitted the bid to foreclose at the former home of Robert Morris University, the 487,000-square-foot building at 401 South State Street, in the latest sign of continued collateral damage the pandemic has had on downtown’s commercial real estate market, Crain’s reported.

CWCapital’s winning bid the building equates to about $40 per square foot, the latest data point in the bloodletting of downtown office values brought on by pandemic-era remote work policies, and the thinning of the herd of viable commercial real estate buyers due to rising interest rates.

The property’s court-ordered sale followed Deutsche Bank filing a foreclosure lawsuit in 2021 on behalf of bondholders in a $48 million loan issued against it, a debt packaged with other loans and sold off to commercial mortgage-backed securities investors. Tampa, Florida-based Rampante defaulted on the loan, Deutsche alleged in the lawsuit.

Rampante bought the eight-story asset for about $68 million in 2016, or about $140 per square foot, and rented the building to Robert Morris until 2020, when the school backed out of the property ahead of its 2024 lease expiration. It’s been vacant since then, even as the landlord invested $5.5 million in upgrades. The landlord also attempted to sell the building for $100 million in 2019, when it was still generating $5.7 million in net operating income for the year.

Then COVID-19 struck. Robert Morris vacated the building and stopped making payments after it was bought out by Roosevelt University. With no demand for office space amid the pandemic, Rampante suddenly had no revenue for a property that initially appeared to be a slam-dunk investment, and they quit making their loan payment, prompting the foreclosure lawsuit in August 2020, the outlet reported

Rampante’s lawyer, Ariel Weissberg, told the outlet the landlord attempted to give control of the property back to the lender, but CWCapital and Deutsche Bank still went ahead with foreclosure proceedings. 

The dispute triggered another legal battle yet to be resolved. In 2021, CWCapital filed a complaint alleging Rampante executive Steven Cuculich owed $4 million in property taxes on the State Street building and still owed “true up payments” as part of a guarantee he signed for the loan.

Weissberg came to his client’s defense. The Rampante lawyer claimed the lender had agreed to relieve Cuculich from the guarantee but a settlement never happened. He was forced to succumb to the foreclosure process because the lender threatened to pursue tens of millions of dollars from Cuculich’s line of credit if he didn’t cooperate, Weissberg said.

CWCapital’s plans for the State Street property are unknown.