In a separate case of potential distress, a firm run by Dallas-based Lincoln Property had its nearly $94 million CMBS loan tied to the Central Park of Lisle office complex placed on a delinquency watchlist this month after its largest tenant lost most of its space, Bloomberg data shows.
The lending issues show the leasing problems that have plunged suburban office owners for more than two years into a public health crisis that has weakened demand. Companies shrinking their office footprints after adjusting to the rise of remote working have pushed suburban office vacancy rates to an all-time high, sparking a battle for landlords to attract and retain tenants and erode property values.
The headaches are particularly painful for homeowners facing impending loan maturities, a group that includes both Adventus and Lincoln Property.
Adventus’ loan to Oak Brook is due to mature in April 2023, a decade after it borrowed the money to fund its nearly $33 million acquisition of the 312,212 square foot complex. The amortizing mortgage has a balance of around $20 million today, according to Bloomberg loan data.
The property was nearly 90% leased in Adventus’ early years of ownership, but that percentage dropped to the mid-70s in 2017 and the building’s net operating income has since fallen by nearly 30%. % to reach just over $2 million in 2021, loan data shows.
The situation has worsened for Adventus this year with the recent expiry of the lease of writing utensil manufacturer Sanford – the property’s largest tenant – and the fact that eight other tenants had lease expiries by now. the end of 2022, according to Bloomberg’s loan report.
With demand for suburban office space subdued, Adventus would likely struggle to refinance its mortgage. Data from Bloomberg shows the company has not made its loan payments for February, March or April, a sign that it may be preparing to turn the property over to its lender.
A spokesperson for Adventus did not respond to a request for comment.
Oak Brook Office Center isn’t the only Chicago-area office building causing problems for Adventus. The company also owns the Riverway office building in Rosemont, which lost a major tenant just before the pandemic hit and was only 65% let at the end of last year, according to Bloomberg data related to Adventus’ $128 million CMBS loan on the property. The building generated net cash flow of less than $5.3 million in 2021, well below Adventus’ $8.2 million in debt service for the year.
Another big lending challenge is emerging in Lisle at the two-building complex along Interstate 88 at 4225 Naperville Road and 3333 Warrenville Road, which Lincoln Property and an unnamed Middle Eastern partner bought in 2017 for $129 million. of dollars.