Wanxiang Faces Foreclosure of Suburban Chicago Office

Larry Krueger is keeping Wanxiang’s resources for loan workouts focused on downtown Chicago rather than the suburbs.

The Krueger-led firm Wanxiang America Real Estate Group, the commercial property arm of Chinese car parts conglomerate Wanxiang that has bankrolled massive projects by Chicago developers, is facing a foreclosure lawsuit for a suburban Bannockburn office property it picked up on the cheap over a decade ago, Lake County court documents show.

The dispute follows a renovation project that went awry, according to public records.

Green Bay, Wisconsin-based Associated Bank last month filed a foreclosure lawsuit against a Wanxiang entity that owns 2275 Half Day Road, a 134,000-square-foot office property. It alleges that Wanxiang failed to pay off a debt of nearly $15 million meant to fund construction and improvements at the property before its October maturity date.

The default comes as the borrower still owes nearly $12 million on the loan and follows a series of extensions of the debt’s maturity. The loan was originated in 2016.

The dispute also comes amid Wanxiang’s $50 million commitment to improvements at Prudential Plaza, the two-tower, 2.3 million-square-foot office complex at 130 East Randolph Street in downtown Chicago — upgrades that were required as part of the landlord’s plan to iron out that property’s $389 million debtload.

While the Prudential Plaza property has begun to attract leases — with tenants such as mental health services provider ComPsych and consulting firm Compass Lexecon — the renovation was undertaken as part of a deal struck last year to extend the property’s massive loan maturity by another two years, to 2027.

It’s unclear why Wanxiang isn’t funding the shortfall at the Bannockburn property. Neither Wanxiang nor an attorney for Associated Bank returned requests for comment.

It’s possible the landlord feels that the property, with about 32,000 square feet available to lease, isn’t worth pouring more money into as the suburban Chicago office market remains depressed with record-low occupancy of about 70 percent.

But walking away from its investment in the property could still come with additional costs for Wanxiang.

As part of the maturity extensions Wanxiang received, it committed to a guarantee of payment of a little more than $2.9 million, in addition to facing the potential to be stripped of the property at a public auction requested by the lender, court records show.

The court appointed a receiver, Daniel McKay of Oak Brook-based McKay Investment Realty, to take over the management and operation of the property, removing Wanxiang as its landlord until it can resolve the dispute with its lender and void the receivership.

The landlord acquired the building back in 2012, when it was in distress. It bought a loan note attached to the building for $4 million, well below the debt’s $10.5 million face value. Wanxiang spruced up the property with the Associated Bank debt, which was classified as a construction loan when it was issued nine years ago.

Wanxiang has helped to finance big projects by Chicago developers Sterling Bay, Magellan, Riverside Investment & Development and CA Ventures.