New York real estate investor Michael Silberberg is facing a lawsuit over Chicago’s Civic Opera Building, with lender Wells Fargo seeking to recover the full cost of the $205 million loan on the downtown office property.
Silberberg’s Berkley Properties and Mark Karasick’s 601W were hit with a foreclosure suit in 2021. Wells Fargo alleges that the New York investment firm 601W failed to make monthly loan payments on the 45-story tower located at 20 North Wacker Drive, adjacent to the historic Civic Opera House. The Cook County Circuit Court appointed real estate services firm Transwestern as the receiver the following week.
Now, Wells Fargo is taking action against Silberberg in his individual capacity while the original foreclosure suit, where he is not a listed party, is pending. The lawsuit filed in federal court in New York on Tuesday alleges that Silberberg did not meet his obligations as the loan’s guarantor.
Gerald Lurie, a Chicago attorney who has been representing the building’s owner in the 2021 foreclosure suit, said he anticipates that Silberberg will be represented by New York counsel in the latest suit but that the investor intends to contest the lawsuit.
“In our view, a lawsuit on the guaranty is premature,” Lurie said.
He added that it hasn’t been established that any liability exists under the mortgage and even if it was the borrowers would have had to commit certain triggering acts to result in personal liability for Silberberg under the terms of the agreement, which they have not.
“The lender knows that. They’re just trying to put pressure on us in the foreclosure case,” he said.
An attorney representing Wells Fargo did not return a request for comment.
Wells Fargo’s action is the latest instance of lenders and loan servicers clamping down on office landlords who have been hemorrhaging tenants since the pandemic began.
The Loop office vacancy rate hit an all-time high at the end of 2022. It rose to 21.4 percent in the fourth quarter according to a report from CBRE, compared to the 13.8 percent rate at the beginning of the pandemic three years ago.
601W, which also owns Chicago’s Old Post Office building, isn’t the only big landlord lenders are calling on for collections. Longtime Chicago building owner Marc Realty is facing a foreclosure lawsuit over a $16.5 million commercial mortgage-backed securities loan on an aging Loop office building, and New York-based AmTrust Realty allegedly defaulted on its $165 million mortgage on an office building at 30 North LaSalle Street.
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