Busey Bank Takes Hit on Office Seized from Clear Height

Clear Height Properties is back to being a renter at its suburban Chicago headquarters.

The Oak Brook-based industrial real estate firm has a new office landlord after it surrendered the property at 2625 Butterfield Road to its lender, Busey Bank, through a deed in lieu of foreclosure earlier this year, DuPage County records show. The transaction settled an $18.5 million loan that Clear Height took out on the property in 2021.

Chicago-based real estate investor Steve Panko paid Busey just under $15 million to buy the 214,000-square-foot building in the western suburb in early April, meaning the lender took a hit of a little more than $3 million on the deal.

Panko’s purchase price of just under $70 per square foot is strong compared to other recent deals for financially troubled commercial properties in the suburbs of Chicago; in the northern suburb of Lincolnshire, an almost completely vacant office property at 4 Overlook Point sold for just $6.2 million this year, or about $7 per square foot. The Oak Brook property is 82 percent leased, well above the average for suburban Chicago buildings of 76 percent as of the end of the first quarter this year.

Panko and Clear Height declined to comment, and Busey didn’t return requests for comment.

The Butterfield Road property is far from the only midsize office deal to fall into distress in the western suburbs. Elsewhere in Oak Brook, Chicago-based real estate investment firm Heitman took a loss on a $58 million loan it provided to Chicago-based Golub and Boston-based Alcion for the 389,000-square-foot, multi-building property known as the Oak Brook 22 complex. After Golub and Alcion handed the property back to the lender, Oak Brook-based Franklin Partners paid $46 million to buy the property last year.

Panko’s acquisition was financed with a $10.5 million loan from Lakeside Bank, public records show. It could lead to the addition of retail on a portion of the property as he considers redeveloping a slice that’s highly visible, according to a news release.

The property sits between the heavily traveled Butterfield Road and Interstate 88 and is also near the popular Oakbrook Center mall and the Yorktown Center, a shopping destination that’s undergoing a makeover to add up to 600 apartments at a cost exceeding $100 million for the first phase of the project.

Clear Height, which owns more than 100 industrial and commercial properties throughout the Midwest, acquired the Oak Brook office building for $13 million in 2018 as part of a joint venture with investor Ryan Corcoran. The price was a bargain at the time, as the property fetched over $20 million in 2001, DuPage County records show.

Clear Height relocated its own offices there in 2021, and also invested in upgrading the property’s common areas, such as its conference room, lobby and fitness center, and created an outdoor space with a lounge area. It’s unclear how much Clear Height spent on renovations.

But it opted to hand the keys to Busey rather than try to refinance the building in a less friendly interest rate environment compared to when it borrowed. Based on Panko’s valuation of the building, Clear Height may have had to kick its own cash into the deal to get a new loan and likely figured that would be throwing good money after bad given the decline in office values corresponding with interest rate hikes and dropoffs in tenant demand.