An investor has finally stepped up to the plate to buy a distressed office property in Schaumburg that failed to attract offers at a recent auction.
A venture led by Sigma Plastics Group founder Alfred Teo acquired the Schaumburg Towers office complex, at 1400 and 1450 American Lane, from Prime Finance, the Chicago-based lender that recently took control of the site after filing an $83 million foreclosure suit in August, Crain’s reported.
The complex, comprising a pair of 20-story towers spanning 890,000 square feet, seemed poised to change hands last month when it hit the auction block, but no one matched the minimum bid of $75 million to beat the lender.
The previous owner, Skokie-based American Landmark Properties, failed to repay a $95.5 million loan on the property when it matured last summer, triggering foreclosure proceedings.
While terms of the deal haven’t been disclosed, the sale price is likely less than the $83 million debt, which would be a little over $93 per square foot. If that’s the case, it would be a financial setback for Prime Finance, while adding to the equity wipeout dealt to American Landmark and Pearlmark Real Estate Partners, which had issued a $14.5 million mezzanine loan in addition to Prime’s senior mortgage.
The distress sale further highlights the struggles of Chicagoland’s office market, characterized by persisting remote-work trends, high interest rates and a tough lending climate. Such challenges contributed to a record-high vacancy rate of 30 percent in Chicago’s suburbs last quarter. Vacancies stood at 22 percent when the pandemic started.
Looming loan maturities have exacerbated challenges facing office landlords. Last year, the value of distressed commercial real estate assets in the Chicago area increased by 58 percent to more than $6.9 billion, the outlet reported, citing research firm MSCI Real Assets.
Teo’s acquisition of Schaumburg Towers is a bet on its potential amid difficult market conditions. Despite being half-empty at the time of purchase by American Landmark in 2018, the complex has shown resilience during the pandemic, securing significant leasing wins after substantial investments in renovations and amenities.
The complex is now 75 percent leased, with payroll software specially Paylocity as its largest tenant, occupying 300,000 square feet on a lease that expires in 2031. Colliers, which has been retained by Teo’s venture to oversee leasing, aims to achieve full occupancy with new ownership’s strong capital structure.
—Quinn Donoghue