Dry Creek Capital Buys Chicago Office Loan at Discount

Dry Creek Capital is getting in position to gain a second foothold in the office market with distressed debt deals surrounding Chicago’s O’Hare International Airport.

The Denver-based firm acquired the loan note for the $47.3 million non-performing mortgage tied to the O’Hare International Center, a two-building, 530,000-square-foot property at 10255 and 10275 Higgins Road in Rosemont, Steve Emerson of Dry Creek confirmed. The property is owned by Utah-based Bridge Investment Group.

The loan note traded for about $26.5 million, according to a person familiar with the deal. Emerson declined to discuss the price. But a transaction for that amount would have dealt a blow to Alabama-based lender Regions Bank, which originated a $50 million mortgage loan to Bridge in 2018 for the landlord’s $64 million purchase of the property. Bridge poured another $8 million into improvements during its ownership, meaning the landlord is feeling some financial pain as the property’s value is likely well below its investment.

The deal sets Dry Creek up to seize the property from Bridge, though Emerson said the path forward is still being discussed between the companies. The asset is 76 percent leased, according to JLL.

This is the buyer’s second distressed debt acquisition in the O’Hare office market. Dry Creek seized the 210,000-square-foot building at 25 Northwest Point Boulevard in Elk Grove Village earlier this summer from a venture of Michigan-based landlord Farbman Group.

It may not be Dry Creek’s last deal in the area, either, though it has recently been active in the Washington, D.C., region, Emerson said.

“We’ve got a ton of dry powder,” he said. “We mainly purchase loans from banks.”

Bridge and Farbman are far from the only victims of the downturn for suburban Chicago office properties. The sector is rough for landlords, as vacancy is hovering near record highs of over 30 percent on average, with demand from tenants shrinking as companies cut space while remote and hybrid work schedules linger and interest rates are elevated. Landlords are being forced to offer steep concessions just to attract or keep tenants.

On top of that, landlords are skittish about sinking more money into their properties when leasing absorption has been negative for years, leaving a lot of suburban offices stuck in limbo.

Dry Creek stripped Farbman of the Northwest Point property two years after buying the loan note for the building, which took its second consecutive nosedive in value as the former landlord’s loan came due, Cook County property records show. Farbman bought the property for just under $20 million in 2013 from a John Buck Company venture that had bought it in 2007 for $31.5 million. Farbman used a $16 million mortgage loan from KeyBank to finance its acquisition, and distressed debt specialist Dry Creek acquired the note in 2023.

JLL’s Tom Hall, Kyle Kaminski, Pat Shields and Sam DiFrancesca marketed the O’Hare International Center loan for sale.