New year, same distress.
New York-based landlord Feil Organization was hit with a foreclosure lawsuit filed by Wilmington Trust this week over contractors’ unpaid mechanics liens placed on its struggling Loop office building at 10 South LaSalle Street.
The liens, which range from $40,000 to $1.5 million, constitute a default on the building’s $105 million loan, the legal filing states. The loan’s special servicer Rialto Capital sent a letter to the Feil Organization regarding the liens in November.
Rialto has been aggressive in its pursuit of distressed loans, particularly since the pandemic.
Feil doesn’t plan to give up the building just yet.
“We are in active negotiations with the lender to extend the term of the loan, and we are confident we will come to a mutually agreeable conclusion,” a representative of Feil said.
Lawyers for Wilmington National Trust declined to comment.
The loan is set to mature in January 2026. But 10 South LaSalle has been in trouble before the mechanics liens started piling up last spring.
The loan backing the building, which was sold off on the securitized debt market, was transferred to special servicing in 2022 due to Feil’s difficulties covering the cost of its debt payments as occupancy fell in the wake of the pandemic. The designation of a specially serviced loan indicates borrowers are risking default on their debt. Feil sought to modify the terms of its loan payment after losing tenant Northern Trust, which had leased 100,000 square feet out of the 781,0000-square-foot building before exiting in 2021.
Feil is up to date on its debt payments, but commentary from loan tracking service Morningstar Credit shows it was transferred to special servicing due to “imminent monetary default.”
Not long after the loan was transferred to special servicing, a leasing deal showed signs of hope for the building.
Charlotte-based Amwins added about 22,000 square feet and six years to its lease in the 37-story building in the spring of 2023. Prior to Amwins’ expansion, the 37-story tower was at 73 percent occupancy. It was 89 percent occupied when Feil refinanced the building in 2015 with the loan that’s now at risk of foreclosure.
So far, it appears the expanded lease wasn’t enough to save the asset.
If Feil loses the building to foreclosure it will be far from the only office casualty due to the pandemic. The Loop has seen record numbers of foreclosures and vacancies since remote work tanked demand for office space and interest rates jumped in 2022 to further erode property values.
Feil has also lost an office building in Chicago to distress and is facing loan troubles with a suburban Chicago mall.
Last year, Feil lost a midmarket River North loft office building at 730 North Franklin to its lender after defaulting on a $15.3 million debt tied to the property. And in the fall, Feil failed to find refinancing to pay off a $75 million loan for the North Riverside Park Mall that already had its maturity date extended once after a stint in delinquency. As a result, it was moved to special servicing, though Feil has said it is also confident it can work out a modified loan term for that property to hang onto its ownership.
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