Adventus Missed Suburban Chicago, Atlanta Office Loan Payments

A Canadian landlord with significant office holdings in the suburbs of Chicago and Atlanta could be at risk of losing most of its 14-property portfolio.

Adventus Realty Trust, which owns a collective 4.3 million square feet of offices in the two markets, missed the March and April interest-only payments on a $350 million loan tied to the assets this spring, according to Kroll Bond Rating Agency.

The debt’s collateral includes five offices in the Atlanta area and three in the Chicago suburbs, including the 304,000-square-foot Crossings complex at 1420 Kensington Road in Oak Brook, and the 203,000-square-foot Cantera Meadows property at 28100 Torch Parkway in Warrenville. The firm spent $36 million to buy the Crossings property in 2013, and $28 million to buy Cantera Meadows in 2014. The landlord had two one-year extension options on the debt, which is scheduled to mature in July, though it would have had to avoid defaults and delinquencies in order to exercise them.

The missed payments came on top of a lender-driven auction scheduled for the end of this month of Adventus’ Oak Brook Office Center, a four-building, 327,000-square-foot asset tied to a separate debt. The landlord agreed to hand that property back to its lender in lieu of dragging out a foreclosure lawsuit.

Further, the recently-missed payments on the Canterra, Crossings and Atlanta-area offices add to the turmoil surrounding Adventus since it made major corporate changes as interest rates started rising last year, squeezing office players with upcoming debt maturities.

The privately held REIT suspended cash distributions to its shareholders in October due to its exposure to variable rate debt — Adventus held about $386 million in variable rate debt, representing approximately 64 percent of its total outstanding debt, the firm said in November. The same month, Adventus had to put down more than $2 million in principal in order to get J.P. Morgan to extend the maturity of a $36 million loan against the 251,000-square-foot Highland Landmark V office building in the Chicago suburb of Downers Grove.

And in April, Rick Charlton, previously the landlord’s COO, was elevated to CEO and acting president, replacing Rodney Johnston. Plus, a slew of changes on the firm’s board of directors have taken place in recent months. Charlton declined to comment.

Building owners like Adventus that lost tenants during the pandemic are having difficulty refinancing or selling off assets before lenders close in, and are struggling to find new tenants to fill vacant space due to frigid demand.

Last year, Adventus lured back exercise equipment company Life Fitness for a 55,000-square-foot office lease at the Columbia Centre III property in suburban Rosemont, about half of what the company had occupied in the building prior to the pandemic.

A separate $29 million loan to Adventus against the 247,000-square-foot Columbia Centre building is still on a lender’s watchlist because the property isn’t generating enough revenue to cover its debt service, according to a report Wells Fargo made to credit ratings agency DBRS Morningstar. And another lender has an even bigger loan to the REIT — the $128 million debt tied to the 869,000-square-foot Riverway office complex in Rosemont — also on a watchlist.

The eight properties tied to the now-delinquent $350 million debt — which total 2.2 million square feet — were 85 percent leased when the loan was issued in 2021, Kroll said. Their occupancy was around the same as of last year, but rising interest rates have eaten into the portfolio’s net cash flow, which was $24.4 million last year. That was enough to cover the portfolio’s debt service for the year, but still marked a 10.6 percent decrease from when the loan was issued.

At this point, it’s unclear how Adventus can resolve its debts.