Rialto Seizes Troubled Suburban Chicago Office

Jeff Krasnoff’s securitized debt heavyweight Rialto Capital snagged control of a distressed Rosemont office property, helping to wrap up one of the Chicago area’s most severe suburban office meltdowns.

The Miami-based special servicer for mortgage debt tied to the nine-story Columbia Center III property at 9525 West Bryn Mawr Avenue took over the building from Adventus Realty Trust in late September through a deed in lieu of foreclosure, resolving a yearslong lawsuit over a $29 million loan default, public records show.

The transfer marks the latest twist in a downward spiral for Adventus, the once-aggressive Canadian investor whose U.S. office portfolio has been in freefall since its 2023 bankruptcy. Adventus leadership didn’t return a request for comment, and Rialto declined to comment.

Rialto’s takeover also highlights how deeply the property’s distress had begun to weigh on the lender’s own books. Columbia Center III — which is in a three-building complex spanning 620,000 square feet — produced just $4.7 million in revenue last year while expenses topped $5 million, including $1.7 million in debt service, according to loan data.

Earlier this year, the property was appraised at just $11.7 million, loan data shows, down bigtime from $41 million back in 2014, when its $29 million loan was originated by JP Morgan and then packaged up with other commercial property debts and sold off to investors.

The imbalance mirrored the broader dysfunction inside Adventus’ debt web. A letter filed Sept. 26 in New York U.S. District Court sheds light on the messy unwinding.

That lawsuit regards a separate $350 million CMBS debt pool with an adjustable interest rate that’s tied to Adventus-owned office properties that have drawn loan defaults, including the other two Columbia Center buildings and more in Illinois and Georgia. Attorneys for the bondholders of the property loans in that case told Judge Margaret Garnett that the parties had reached a “settlement in principle” covering multiple distressed assets — but that the “complex deed-in-lieu agreements” and receivership logistics had slowed final execution.

Five of Adventus’ Georgia properties had already been seized via nonjudicial foreclosures, the letter said, while deed-in-lieu transfers for three more — including the Columbia Centre I and II offices in Rosemont as well as The Crossings in suburban Chicago’s Oak Brook and Cantera Meadows in Warrenville — were “substantially final.”

During the origination of the $350 million loan a little more than four years ago, the properties used as collateral included five in the Atlanta area and three in the Chicago area, with the two Columbia Center buildings, Cantera Meadows and The Crossings also getting wrapped into the deal. The buildings were appraised at $439 million at the time, but were valued at $47.8 million in November, according to loan data.

The court document confirms that Adventus’ unraveling extended far beyond Chicago. Its multi-state office portfolio, once touted as a stable income play, instead triggered litigation in multiple jurisdictions.

Now Rialto must decide whether to hold, sell or reposition the Rosemont asset it just seized. While Rosemont remains one of the better-performing suburban submarkets, even its Class A towers face tough math. As hybrid work and higher interest rates reshape office demand, Rialto’s newest acquisition may prove less a trophy than a test of timing.