Kohan Seizes Loop Office Building Through Deed in Lieu

A New York-based distressed mall buyer is expanding its Chicago office holdings, taking control of a Loop office building through a deed in lieu of foreclosure after scooping up its debt at a steep discount.

A venture of Kohan Retail Investment Group late last week took title to the 28-story building at 33 West Monroe Street, wresting the property from an affiliate of New York-based AmTrust RE. Crain’s reported that Kohan CEO Mike Kohan confirmed the move, which followed the firm’s purchase of a $60 million loan backed by the building last fall.

The 900,000-square-foot building, at the southeast corner of Monroe and Dearborn streets, is the latest prominent downtown office property to change hands via distress. Rather than slug it out in court, AmTrust handed over the keys, a route increasingly favored by owners and lenders looking to avoid long foreclosure battles, according to the publication.

Kohan took its first step toward ownership in November, when it bought the mortgage from a venture of Des Moines-based Principal Life Insurance. AmTrust had secured the debt in a 2011 refinancing, according to Cook County records. While Kohan declined to disclose what it paid for the loan, the outlet noted that the brokerage Transwestern reported in October that it was under contract for about $25 million.

Great Neck, New York-based Kohan, best known as a buyer of troubled malls and shopping centers, isn’t an obvious office landlord. But Kohan told the outlet that the company plans to use its low cost to lure tenants with aggressive rents.

“We are looking for tenants that didn’t have the opportunity to be part of [the building at 33 West Monroe] to come forward,” he said. “We will make a deal.”

The building is about 44 percent leased, according to CoStar, well below the downtown average of roughly 72 percent. Built in 1981, it was once the headquarters of Arthur Andersen before the accounting firm’s collapse in the early 2000s.

The Monroe Street acquisition follows Kohan’s bargain buy last year of the 65-story tower at 311 South Wacker Drive for $45 million, a sliver of the $302 million that building fetched in 2014.

For AmTrust, the handoff adds to a rough stretch in Chicago. The firm has already lost the building at 30 North LaSalle Street to foreclosure and is battling a foreclosure lawsuit tied to its $260 million Illinois Center mortgage. It has also flirted with surrendering the building at 135 South LaSalle Street before pivoting to an office-to-apartment plan under the city’s LaSalle Street Reimagined program.

With high interest rates, sagging values and loans coming due, more Loop owners are facing similar choices. Just last month, Chicago-based Nuveen took control of the building at 321 North Clark Street to resolve a troubled loan.

— Eric Weilbacher