Feil Organization Facing Multiple Chicago Foreclosures

Jeffrey Feil is being shaken down by yet another lender with the latest in a series of setbacks for his firm’s commercial property investments in Chicago.

His struggles are emblematic of the languishing market for midsize loft-style offices as well as Loop high-rises while his firm struggles to satisfy lenders on each type of asset amid the downturn for commercial real estate stemming from remote work trends.

Private equity giant KKR’s securitized loan servicer K-Star Asset Management filed a foreclosure lawsuit this week against a venture of Feil’s company, New York-based Feil Organization, in Cook County court. It alleges the landlord has defaulted on debt tied to a four-story, 35,000-square-foot loft office building, constructed in 1872, at 1027-1031 West Madison Street in the hot West Loop area.

Feil bought the building in 2018 for $13.1 million, or $374 per square foot, using an $8.5 million loan originated by Citibank’s real estate division. The loan was later sold off to investors in bonds backed by commercial property debts, opening up the financial details of its performance to the public.

The lender says Feil still owes over $8.2 million on the loan, after accounting for interest and fees following an April default on the mortgage, Cook County records show. The loan wasn’t supposed to mature until the fall of 2028, but has since become more than three months delinquent as the building’s vacancy lingers. The lender says Feil proposed a workout solution for the troubled debt, but K-Star found the terms unacceptable. The details of the proposal haven’t been disclosed.

The property was fully leased through 2023, and brought in more than $1 million in revenue — plenty to cover the costs of debt service and operating the building, according to loan data. But its occupancy dropped to less than 50 percent last year, when it brought in only a little more than $437,000 in net cash flow, loan data shows.

Feil didn’t return a request for comment and neither did an attorney representing K-Star.

The alleged loan default is the landlord’s latest blunder in Chicago’s office market. Feil already surrendered a similar loft office building in River North, when it handed lender Beltway Capital the keys to 730 North Franklin Street last year to resolve a $15.3 million foreclosure lawsuit.

Plus, Feil is facing a lawsuit brought by special servicer Rialto Capital for an alleged default on a $105 million CMBS loan tied to 10 South LaSalle Street, a 781,000-square-foot building in the Loop. Feil has said it’s working on resolving the dispute, but a receiver has been appointed to operate the property while the litigation plays out, loan data indicates.

Furthermore, Feil is seeking either forbearance or another loan modification for a $75 million debt tied to the North Riverside Park Mall in suburban Chicago. The firm poured $9 million into renovating the 447,000-square-foot mall interior in a project that wrapped up last year, but it missed the maturity date on the loan, which is also a CMBS deal. The lender is considering Feil’s request for another maturity date extension, after it already granted one to allow the mall renovation project to be completed, loan data shows.