Another downtown Chicago landlord has been hit with a foreclosure lawsuit.
The venture of New York-based AmTrust Realty that owns the 983,000-square-foot office building at 30 North LaSalle Street defaulted on its loan tied to the property, Crain’s reported. According to the lawsuit, the owners missed the deadline to pay its August bill on the $165 million mortgage.
An entity of American General Life Insurance filed the lawsuit, which lists $186 million in principal, interest and other fees AmTrust owes. The lender issued the largest chunk of the debt when AmTrust bought the office tower in 2014.
The lawsuit echoes the struggles of Chicago’s office market in a post-pandemic world where companies are downsizing their office footprints. With many companies still allowing remote work options even after the pandemic, they have opted to lease smaller offices as they no longer need to accommodate as many people in person.
The city’s total leasing dropped to its lowest level in more than a year in the third quarter, with transactions totaling 1.8 million square feet, according to a report from Savills. Plus, even more real estate was put onto the sublease market in the last three months to set a new record-high of 6.6 million square feet, reversing course from earlier this year, when tenants had started to make a dent in the key metric of supply.
“This is not a Chicago phenomenon, it’s an everywhere phenomenon,” Savills’ Joe Learner told The Real Deal earlier this year. “We’ll still have this relative sluggishness, which will manifest itself in large vacancies and this tenant-favorable marketplace will continue.”
Earlier this year, AmTrust began working on $100 million renovations to its portfolio of downtown office towers that it hoped would bring in more tenants. Not included in those planned upgrades, however, was another tower in the midst of distress at 135 South LaSalle Street. The former longtime home of Bank of America has been largely empty since the financial institution left the property for a brand new Wacker Drive tower built by John O’Donnell’s development firm Riverside Investment & Development.
As a result, AmTrust has been facing a foreclosure on a $100 million loan on that 1.3-million-square-foot property, too. AmTrust earlier this year was in talks to surrender the deed to the property in lieu of going through the court process, but the status of those discussions isn’t clear.
If AmTrust can’t reach an agreement with American General to modify the LaSalle property’s loan terms, the lender could seize the property, which may be worth less than the amount of debt AmTrust owes on it.
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— Victoria Pruitt