Office woes in suburban Chicago are reaching a peak as a growing number of big landlords are about to sell to lenders two of the most expensive properties of the past decade.
A joint venture with Dallas-based Lincoln Property Company was canceled after it failed to repay a nearly $80 million loan on the Lyle Central Park office building due in January, Crain said. Foreclosure litigation. report. Separately, Vancouver, British Columbia-based Adventus Realty Trust assigned a $114 million mortgage on its four Riverway office towers in Rosemont to a special servicer — a property that is in foreclosure. Red flags on the brink of foreclosure.
The woes are the latest symptoms of woes at offices in the Chicago area, which is still reeling from the remote-working movement sparked by the pandemic. Company layoffs, rising interest rates and bank failures have exacerbated the problem in recent months, leading a large number of landlords to abandon their holdings, sell properties at a loss or face foreclosure.
Lincoln Property and an unnamed Middle Eastern investor paid $129 million in 2017 for two buildings at 4225 Naperville Road and 3333 Warrenville Road, along Interstate 88. The 690,000-square-foot Lisle Central Park complex. Armour-Eckrich Meats caused a stir last year when it opted to return most of its space to landlords, causing occupancy to drop from 86% to 78%.
In October, the complex was appraised at $68.3 million, well below the $79.5 million mortgage balance. So by January, Lincoln Ventures will be busy finding $11 million in equity to pay down debt. The complex reportedly generated just over $9 million in net cash flow last year, down 17% from 2019.
Meanwhile, in Rosemont, Adventus is in trouble for its $173 million purchase of the Riverway complex in 2016, a deal that marked one of the highest prices ever paid for a multi-tenant office building in suburban Chicago. The company, whose chief executive is Rick Charlton, applied for a $128 million CMBS loan to finance the acquisition.
The property performed well, maintaining occupancy above 90 per cent until 2019, when one of its largest tenants, the Central States Pension Fund, vacated the site after its lease expired. Then came the outbreak, which led to an occupancy rate of 67% in 2020. That year, the complex brought in $3.9 million in net cash flow, well below Adventus’ $8.2 million in debt service payments that year, the outlet said.
To make matters worse, leases for nearly half of its footprint, its current largest tenant, US Foods, are due to expire in September. Adventus’ mortgage was transferred to special servicer LNR Partners on May 18 “imminent default due to cash flow problems”.
read more
Adventus also defaulted on another $350 million loan for a portfolio of eight office buildings in suburban Chicago and Atlanta. Landlords missed out on interest-only loans in March and April related to the properties, which include the 304,000-square-foot Crossings office building in Oak Brook and the 203,000-square-foot Cantera Meadows property in Warrenville.
— Quinn Donoghue
