Feil Organization’s Chicago Retail Loan to Special Servicing

A rent cut request from Lululemon just sent a Lincoln Park retail loan into special servicing.

A property housing Lululemon in Chicago’s Lincoln Park transferred to special servicing after the owner, the Feil Organization, requested a rent reduction that would push the asset’s income below debt service coverage, according to Morningstar Credit.

The 31,800-square-foot building at 938 West North Avenue is 83 percent leased to Lululemon, whose 26,400-square-foot lease runs through January. Sephora occupies the other 5,400 square feet, with a lease expiration in January 2029. The building was last renovated in 2018.

The rent for the athleticwear brand was underwritten at $1.4 million annually, or roughly $54 per square foot. Annual debt service on the $19.5 million loan is about $713,000. The request for a rent cut would push the debt service coverage ratio below breakeven, Morningstar said, though the potential rent reduction’s size is unknown.

The loan is interest-only, with monthly payments of just over $60,000. As of the end of last year, the debt was covering at a healthy 2.42x, offering a glimpse of how severe the rent cut would be to threaten repayment. Maturity is set for October 2029.

Lululemon opened the North Avenue location in 2018 as its largest North Side store.

The building’s loan was packaged into a 2019 CMBS deal issued by Wells Fargo, where it makes up just over 3 percent of the pool. The loan is now being handled by special servicer Argentic Services Company.

The move into special servicing adds to a string of setbacks for Feil, which has been working through distress in other parts of its portfolio.

In Chicago’s Loop, a foreclosure suit was filed in January against the firm over unpaid contractor liens at 10 South LaSalle, where Feil had struggled to refinance amid the wider crisis for downtown office. Meanwhile, in New York, Feil recently started construction on a Billionaires’ Row condo conversion after years of delays and litigation.

Neither Feil nor the servicer has commented publicly on the future of the property. Lululemon’s lease expiration is less than two years away.

Chicago’s broader retail real estate market is tight, despite some turbulence. Net absorption fell by 420,000 square feet in the first quarter, the first negative reading since late 2022, but the city’s vacancy rate edged up only slightly to 4.7 percent, just above its all-time low, according to JLL.