AmTrust’s Illinois Center dips into monthly shortfalls on $248M loan

Income isn’t meeting debt service requirements on massive office property

AmTrust’s Illinois Center Dips into Shortfalls on $248M Loan
Amtrust's Jonathan Bennett and 111 East Wacker Drive (LinkedIn, Google Maps, Getty)

AmTrust RE’s huge riverfront office tower complex in Chicago is struggling to stay afloat amid ongoing cash flow problems, preventing the landlord from paying the debt service on its $248 million loan, according to Morningstar Credit.

The credit ratings agency reported this month that the loan tied to the Illinois Center, a two-tower, 2.1 million-square-foot asset, at 111 East Wacker Drive and 233 North Michigan Avenue, was placed into special servicing and facing “ongoing monthly shortfalls.” The building was 48 percent occupied by the end of last year. A loan is generally sent to a special servicer when it appears likely the borrower will default on the debt.

AmTrust doesn’t plan to surrender the asset, however, according to its real estate arm’s president Jonathan Bennett.

“As vacancies have risen over the past few years, the property’s cash flow began to fall short of its loan obligations, but we are actively working on negotiating a workout with the lender,” Bennett said through a spokesperson. “We still see a lot of upside in the property, and have several concepts for significant value creation once we reconfigure the capital stack.”

AmTrust purchased the Illinois Center for $376 million in 2015, when the complex was 70 percent leased. The property scraped by in 2022, generating nearly $15.9 million in net cash flow, just more than its $15.8 million debt service payments for the year but down significantly from its $23.9 million in net cash flow in 2019, according to loan records.

There’s a balance of about $248 million on a loan originated by CitiGroup against the two-tower asset, and it’s set to mature in a year. The loan was bundled into a package of other commercial real estate debts and sold off to investors in commercial mortgage-backed securities, making details of the property’s performance public.

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The property is one of many suffering from a reduction in office tenancy and foot traffic in the wake of the pandemic.

The U.S. Department of Health & Human Services ditched its roughly 170,000-square-foot space in the Illinois Center last year. In the same month, the complex lost its second-largest tenant, Bankers Life & Casualty.

When the tenants left AmTrust, which owns five other downtown Chicago towers, the firm indicated it had no plans to throw in the towel. The company is planning a number of renovations to the complex, including an upgraded conference center and added amenities, according to a special servicer that’s overseeing the mortgage.

“Over the coming months, we’ll be working closely with the lender and special servicer to find a path forward that is beneficial for every stakeholder — including the lender, tenants, the borrower and the broader Chicago community,” Bennett said.

Signs of trouble popped up in February when the loan payments were initially reported 30-days delinquent by Morningstar. At the time, the debt servicers and borrowers explained that the delinquency was due to a minor technical problem that would be rectified quickly. Recent loan commentary indicates that was only a small snapshot of the building’s troubles.

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