Loop retail heads to foreclosure auction after NY landlord’s default

A T.J. Maxx-anchored retail center in Chicago’s Loop is headed for foreclosure auction after its New York-based landlord was accused of defaulting on a $60 million loan.

The property at 1 North State Street is set to be auctioned Monday, following a significant drop in its valuation, Bisnow reported. 

The building’s 170,000-square-foot retail portion has seen its worth plummet by 80 percent. It was valued at $101 million when German American Capital Corporation issued a $60 million loan in 2013 and packaged it into commercial mortgage backed securities. An appraisal in August pegged the value at $19.9 million. The drastic reduction comes as the downtown retail market faces difficulties. Retail vacancy in the Loop surpassed 30 percent last year, the highest figure on record since 2002, according to Stone Real Estate.

Investor Isaac Shalom, who owns the retail portion of the building, is at the center of a $50 million foreclosure lawsuit after allegedly defaulting on mortgage payments. 

The lenders’ representative sued Shalom at the end of last year, claiming he had not made a payment since April 2023, triggering an accelerated due date for the remaining balance of $48 million. Despite having an occupancy rate of more than 93 percent in December, the property has struggled financially due to lease changes with its major tenants.

Burlington, which occupies 60,000 square feet, extended its lease by a year but switched to a percentage rent model, significantly reducing rental income. T.J. Maxx leases 70,000 square feet. Its lease expired last month, and it’s unclear whether it will renew.

The property’s financial troubles are part of a broader trend in the Loop, where reduced foot traffic and office occupancy post-pandemic have taken a toll on retail real estate. Refinancing has also become more difficult to secure as interest rates rise and banks become more cautious with lending.

— Andrew Terrell

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