Landlords in Alleged $342 Million Default on Chicago Loans

Even as David Werner is on a dealmaking streak in the distressed office market, he and partner Joseph Mizrachi have dragged fellow investors Rubin Schron and David Lowenfeld into a $167 million alleged loan default in Chicago.

Schron’s New York-based firm Cammeby’s International and David Lowenfeld’s New York-based World Wide Group allegedly defaulted on a commercial mortgage-backed securities debt tied to the ground beneath the building at 300 South Riverside Plaza, according to loan servicer reports. The alleged default marks a dramatic escalation of distress at the 1.1 million-square-foot West Loop office tower, where a complex ownership structure has finally buckled.

The alleged ground default was triggered by the building’s leasehold owners, New York-based Werner’s eponymous firm and Boca Raton, Florida-based Mizrachi’s Third Millennium Group. While they’ve been in alleged default on their own $175 million building loan from South Korea-based Shinhan Investment Corp. since 2023, they had still been making ground lease payments to Schron and Lowenfeld. But those stopped late last year, too, as the October installment was the first payment missed, loan servicer reports show.

By allegedly withholding rent, the building’s owners effectively pulled their ground landlords into the abyss. Schron and Lowenfeld’s $167 million ground debt — originated by Morgan Stanely and split across the MSBAM 2015-C22 and MSC 2015-MS1 loan pools — was transferred to special servicer LNR Partners, a subsidiary of Starwood Property Trust, in November for “imminent default,” loan data shows.

The hammer has already dropped. Arne Shulkin’s team at LNR sent a formal notice of default on Nov. 21 and officially accelerated the loan to be fully due ahead of maturity on Dec. 11, notes from the special servicer said. A local lawyer has been retained to explore foreclosure litigation and the appointment of a receiver. While LNR is “dual-tracking” the process by discussing workout alternatives, the move toward litigation suggests the era of extend and pretend has reached its limit.

So far, the path forward for the leasehold default is unclear. Shinhan didn’t return a request for comment on whether it would resume ground lease payments if it seized the building from Werner and Mizrachi.

Representatives of the firms led by Werner, Mizrachi, Schron and Lowenfeld also didn’t return requests for comment, nor did LNR Partners.

This collapse highlights the inherent volatility of the bifurcated ownership model, which splits the land from the building to boost returns — a strategy long championed by players like Jay Shidler, whose similar gambits have sunk multiple deals in Chicago, including at the Loop’s Burnham Center.

While these deals may offer upfront benefits, they often become unsellable in high interest rate environments. The strategy has also fueled recent carnage for Shaya Prager of Opal Holdings. Lender GreenState Credit Union recently completed a foreclosure on Prager’s suburban Chicago office campus, after his firm’s default on the $104 million Deerfield property encumbered by a similar ground lease structure.

At the 23-story tower on 300 South Riverside, the property’s fundamentals have been shredded by tenant departures. Zurich North America recently ditched the property for the Willis Tower, and Cars.com slashed its footprint. Now, with the ground and the building in simultaneous alleged loan defaults, the very foundation of the deal is being wiped out.

Still, the setback at the property hasn’t stopped Werner from making other plays. He and partner 601W Cos. just this week purchased the building at 175 West Jackson Boulevard out of distress for $41 million. That is about 87 percent less than the $306 million prior owner Brookfield Properties spent to buy it in 2017.

Werner also teamed up with 601W last year to buy the building at 303 East Wacker Drive at a big discount from its previous purchase price.

He’s going even bigger in New York. To close 2025, Werner struck a $270 million deal to buy One Dag Hammarskjöld Plaza at 885 2nd Avenue in Midtown East, about half off its previous purchase price in 2019. And earlier in 2025, Werner and partner MetroLoft scored a $700 million loan from Madison Realty Capital for the office-to-residential conversion project at 235 East 42nd Street.

Werner and 601W in November also closed a $165 million purchase of the 532,000-square-foot office building at 205 East 42nd Street in New York.

At the same time, Mizrachi’s firm is also trying to make moves. Third Millennium last year revived its effort, in partnership with Hines, to find an anchor tenant for an office development it wants to build in Chicago’s West Loop, next to the 31-story building they constructed together at 540 West Madison Street a decade ago. The new plan would be a 28-story tower consisting of over 600,000 square feet of office space at 590 West Madison.