A loan extension wasn’t enough to save a west suburban office landlord from foreclosure, spotlighting the growing distress wave that’s looming larger than ever over Chicagoland.
A venture of Pennsylvania-based Pembroke IV has been hit with a $25 million foreclosure lawsuit after failing to pay off debt tied to the six-story office building at 2001 York Road, in Oak Brook, by its late March maturity date, Crain’s reported.
An entity representing bondholders sued in DuPage County Circuit Court last month. The loan was part of a package sold off to commercial mortgage-backed securities investors.
The troubled state of the property reflects broader challenges facing Chicaoland’s office market. Pandemic-fueled remote-work trends drove up vacancies to a record high of more than 30 percent at the end of last year. High interest rates and a tight lending climate have only made matters worse since last year, crushing property values while stymieing refinancing pursuits.
Chicago had over $6.2 billion worth of distressed commercial real estate by the end of the first quarter, the outlet reported, citing research firm MSCI Real Assets. Only Manhattan had more distressed commercial real estate.
In another case of suburban office distress, an affiliate of JPMorgan Chase took back the mostly vacant Landmark V office building in Downers Grove last summer, after the previous owner, Adventus Realty Trust ran into trouble with its $35.7 million loan. JPMorgan recently listed the 251,000-square-foot building, and it’s expected to sell for a fraction of the $71.6 million the Adventus paid in 2020.
Pembroke IV previously faced foreclosure in January 2023, but an agreement was reached to extend the maturity date to March 31 of this year. Despite efforts to refinance or secure new capital, Pembroke’s challenges persisted. The building’s occupancy stood at 58 percent for most of the previous year, with insufficient net cash flow to cover debt service, according to Bloomberg loan data.
Pembroke IV purchased the 184,000-square-foot building in 2013 for $34 million, $184 per square foot, and refinanced it in 2019, with Comcast as its anchor tenant. However, Comcast later vacated the site, dealing a blow to the landlord.
The property was acquired from Chicago-based developer John Buck, who developed it in a joint venture with Travelers Insurance in the late 1990s.
—Quinn Donoghue
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