Lack of bidders leaves lenders with office keys in suburban Chicago

When a pair of distressed suburban Chicago office properties hit the auction block recently, no investors were willing to bid. 

Instead, the buildings ended up back in the hands of the lenders who called for the sales.

Prime Finance, the lender for the Schaumburg Towers, at 1400 and 1450 American Lane, secured the properties after no one else matched the minimum bid of $75 million to beat the lender. Meanwhile, in Rolling Meadows, Miami-based loan servicer Rialto Capital was the lone bidder on an office complex at 1600 Golf Road, as no one else matched its minimum $16.6 million.

The lack of outside bids for these buildings is another indicator that most investors are staying far away from the suburban office market, as not only landlords but now lenders face the prospect of losses. The starting bids for Schaumburg Towers and 1600 Golf Road were too high for bargain hunters, who could circle back if the lenders put them on the market again.

Current plans for the buildings, however, are unclear.

Prime Finance and Rialto Capital did not respond to requests for comment.

The 20-story 890,000-square-foot Schaumburg Towers were previously owned by Skokie-based American Landmark Properties. The firm defaulted on its $96 million mortgage, according to the foreclosure lawsuit filed by Prime Finance in August 2023. At the time, the lender alleged that American Landmark owed $83 million in unpaid principal and interest.

The landlord hired Cushman & Wakefield to market the buildings earlier in the year but they never sold. While it didn’t list an asking price, it was expected to draw bids between $110 million and $120 million, people familiar with the offering said at the time.

The property ended up back in the hands of Prime Finance via a Judicial Sales Corporation auction on Dec. 26.

At 1600 Golf Road, a venture led by Chicago-based investor Chet Balder defaulted on a $22.8 million loan, court records show. The office building barely stayed afloat over the prior year, as its net cash flow of $1.9 million was just enough to cover $1.4 million in debt service for 2022. 

When Verizon, one of the building’s largest tenants, vacated its 43,000-square-foot space, the property’s fate was sealed. In addition, Bank of America’s 93,000-square-foot lease was set to expire in December.

Rialto Capital filed the foreclosure and ultimately ended up with the keys via an auction held by the Judicial Sales Corporation Jan. 19.

Other suburban office buildings have sold for steep discounts in recent months. IndusPAD, a Massachetts-based firm that’s made a habit of snagging distressed properties, has taken on multiple opportunities in Schaumburg. Most recently, the firm bought a fully vacant 178,000 square-foot office complex at 955 American Lane for $1.3 million, or a little over $7 per square foot, Cook County records show. The seller was Phoenix-based Orion Office REIT. The office complex last sold in 2010 for $30 million, representing a massive loss in value from when a predecessor of Orion Office bought the building.

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