Adventus dealt $350M foreclosure suit during bankruptcy

Canadian REIT poised to lose suburban Chicago, Atlanta office portfolio

Adventus Dealt $350M Foreclosure Suit During Bankruptcy
Adventus Realty Trust’s Rick Charlton with 1420 and 1520 Kensington Road, 28100 Torch Parkway, 5600 North River Road and 9450 West Bryn Mawr Avenue

A major suburban Chicago office owner’s troubles are coming to a head, as a lender closes in on a massive loan months after the borrowing real estate investment trust entered bankruptcy in Canada.

Vancouver, British Columbia-based Adventus Realty Trust has been hit with a federal lawsuit over nonpayment of a $350 million loan secured by eight office buildings in the Chicago and Atlanta areas. The plaintiff is Wells Fargo, acting as trustee for bondholders in the debt, which was packaged into a security and sold off to investors in financial instruments.

The loan was issued in July 2021 and is secured by the Adventus-owned properties called the Crossings at 1420 and 1520 Kensington Road in Oak Brook; Canterra Meadows at 28100 Torch Parkway in Warrenville; and the three-building Columbia Centre complex on North River Road and West Bryn Mawr Avenue in Rosemont; plus five properties in Georgia. The portfolio totals 2.2 million square feet square feet between the two markets.

The loan default is a symptom of broader financial problems for Adventus. The firm voluntarily entered into bankruptcy in July in a Canadian court, according to a news release on the company’s website.

The moves to seek protection from creditors while reorganizing its debt “follow extensive, and ultimately unsuccessful, efforts by the Adventus Entities and their affiliates to raise additional capital or secure another potential alternative to permit the continuation of the Adventus Entities’ portfolio of properties in the ordinary course,” the statement said.

Adventus’ United States-based subsidiaries will continue discussions with lenders and special servicers on the disposition of the landlord’s properties, the trust said.

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The landlord stopped making monthly interest-only payments on its $350 million portfolio loan starting in March and didn’t repay the debt when it matured in July, according to the suit. The firm also stopped paying necessary operations expenses and failed to fulfill its obligations to tenants, including for safety and utilities; the suit references a “plethora” of liens against the property from contractors who allege they weren’t paid.

The suit also claims that the borrower violated the loan agreement by transferring out revenues collected by entities that owned its office buildings to fellow Adventus affiliates, including one that signed onto the debt as a guarantor. The transfers “misappropriated” rental income from the properties and added up to almost $94 million between 2021 and 2023, ultimately causing the borrowing ventures to become insolvent, the suit said. More than $3 million has been transferred out since Adventus stopped making payments on the loan.

Adventus did not respond to requests for comment. Wells Fargo and its attorneys did not respond to requests for comment.

The loan was originated by Credit Suisse, which was taken over by the Swiss government earlier this year, before the debt was packaged into a security and sold off to other investors. Adventus paid $95 million for the 618,000-square-foot Columbia Centre in 2014, $36 million to buy the 304,000-square-foot Crossings property in 2013, and $28 million to buy the 203,000-square-foot Cantera Meadows asset in 2014.

The lawsuit is asking Adventus to vacate and surrender possession of the properties, and for the court to appoint Riveron’s Matthew Mason as a receiver.

This debt isn’t Adventus’ only problem. The lawsuit comes on top of a lender-driven auction that had been scheduled earlier this year for Oak Brook Office Center, a four-building, 327,000-square-foot asset tied to a separate $24 million debt. That lender is trying to find a buyer willing to take it on after seizing control of the property from Adventus through a deed in lieu of foreclosure following a loan default.

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