Suburban Chicago’s office distress is coming to a head as more big landlords get closer to having two of the priciest properties sold in the last 10 years stripped by their lenders.
A venture of Dallas-based Lincoln Property Company was hit with a foreclosure lawsuit after failing to pay off its nearly $80 million loan on the Central Park of Lisle office complex before it matured in January, Crain’s reported. Separately, Vancouver, B.C.-based Adventus Realty Trust transferred its $114 million mortgage on the four-building Riverway office complex in Rosemont to a special servicer — a red flag that the property is on the brink of foreclosure.
The predicaments are the latest symptoms of office distress in the Chicago area, which is still reeling from the pandemic-fueled remote work movement. Company downsizings, increased interest rates and banking failures amplified the issue in recent months, leading to a slew of landlords surrendering their holdings, selling their properties at a loss or facing foreclosure.
Lincoln Property and an unknown Middle Eastern investor paid $129 million in 2017 for the two-building, 690,000-square-foot Central Park of Lisle complex at 4225 Naperville and 3333 Warrenville roads, along Interstate 88. The property was staying afloat, but it took a hit last year when Armour-Eckrich Meats took an option to return most of its space to the landlord, causing the occupancy rate to drop from 86 percent to 78 percent.
The complex was appraised at $68.3 million in October, much less than the $79.5 million mortgage balance. Thus, the Lincoln venture would have been in a scramble to find $11 million in equity to pay off its debt by January. The complex generated just over $9 million in net cash flow last year, down 17 percent from 2019, the outlet reported.
In Rosemont, meanwhile, Adventus is in trouble with the Riverway complex it bought for $173 million in 2016, a deal that marked one of the highest prices ever paid for a multi-tenant office building in the Chicago suburbs. The firm, whose CEO is Rick Charlton, took out a $128 million CMBS loan to finance the acquisition.
The property was performing well and maintained occupancy levels above 90 percent before 2019, when one of its largest tenants, Central States Pension Fund, vacated the site upon its lease expiration. Then the pandemic hit, resulting in a 67 percent occupancy rate in 2020. That year, the complex pulled in $3.9 million in net cash flow, falling well short of Adventus’ $8.2 million debt service payment for the year, the outlet said.
To make matters worse, its current largest tenant, US Foods, has a lease that expires in September for nearly half of its footprint. Adventus’ mortgage was transferred to special servicer LNR Partners on May 18 “for imminent default due to cash flow issues.”
Read more
Commercial
Chicago
Market Street gives up West Loop office building via deed-in-lieu
Commercial
Chicago
Chet Balder surrendering Rolling Meadows office
Commercial
Chicago
Rubenstein in trouble on $85M loan for Continental Towers
Adventus is also delinquent on a different $350 million loan tied to an eight-building portfolio of offices in suburban Chicago and Atlanta. The landlord missed the March and April interest-only payments million loan tied to the assets, which include the 304,000-square-foot Crossings office complex in Oak Brook and the 203,000-square-foot Cantera Meadows property in Warrenville.
— Quinn Donoghue