Suburban Office Landlord Scrambles for Sale to Cover Loan

An office complex near the suburban Hawthorn Mall is back on the block, with its owner racing to cover a loan that came due at the end of last year.

Colliers is marketing the 189,700-square-foot property at 75 North Fairway Drive in Vernon Hills on behalf of Axial Real Estate Advisors, according to a marketing flyer. The Minnesota-based firm paid $30.1 million for it in 2015. Axial has been trying to unload the asset for more than two years, Crain’s reported. But rising rates and investor skittishness over offices stalled a deal. When listed at the end of 2022, the asking price was $31.4 million.

The firm is facing pressure from a $21 million mortgage originated by Jacksonville-based Everbank, which matured in December. Rather than take the keys, the lender teamed with Axial to test the market for a sale that would at least clear the outstanding debt, a person familiar with the offering told the outlet. No asking price has been set. Clearing the mortgage alone would be about $111 per square foot.

It’s a scenario playing out across Chicagoland, where record vacancies, remote work and expensive debt have landlords scrambling to refinance or hand properties back to lenders. Some banks are seizing buildings outright, while others are opting for sales to cut losses.

Axial is betting its building looks better than most, as the property is fully leased to medical device makers BD and Steris through 2031. BD is downsizing by nearly half next year, when it will exit 79,000 square feet. That leaves a looming hole Colliers is pitching as a future upside.

The flyer highlights the building’s positioning in a Lake County cluster of life sciences tenants that have historically stuck around longer than typical office users. Neighbors include AbbVie, Abbott, Baxter and Pfizer. When Axial sold the Bannockburn Corporate Center last year for $28 million — close to what it fetched in 2016 — it showed an appetite in the market for suburban offices with strong-credit tenants.

Built in 1996, the Vernon Hills property is part of Continental Executive Park, just south of the Hawthorn Mall, itself in the midst of a $252 million makeover with apartments, restaurants and open-air plazas. Colliers brokers Alissa Adler and John Homsher are leading the marketing push.

— Eric Weilbacher