Due to the risk of foreclosure, Chicago office tower is returned to the lender

The decision by Hearn and Fortress Investment Group to voluntarily hand over one of their Chicago properties to their lender reflects the growing trend of voluntary surrenders currently seen across the country in the real estate sector, particularly in struggling office spaces.

This concerns the 26-story office tower in Chicago’s Loop business district, which has been handed over by its owners to its lender. This comes approximately a year after a $138 million loan matured.

Hearn, currently based in Chicago, and Fortress Investment Group, based in New York, as shown in Cook County property records, transferred ownership of the building through a deed in lieu of foreclosure.

According to the data in the report, the property was received by Torchlight Loan Services, the special servicer managing the commercial mortgage-backed securities loan tied to the building. Additionally, it states that the loan, which matured in August 2023, still has an outstanding balance of just over $137.8 million.

This Chicago building is just one of many office properties currently being sold at steep discounts or abandoned by their owners due to an inability to refinance their debt or continue making payments. This phenomenon is attributed to low office demand, rising interest rates, and low transaction volumes—factors that have pushed many borrowers to opt for voluntary surrenders rather than endure a formal foreclosure process.

According to data from a major real estate news outlet, this office tower is currently 26% vacant, as its main tenants, such as Bank of America and BMO Financial, have moved to newer, more modern towers near the Chicago River or in Fulton Market. This adds to the challenges already left by the COVID-19 pandemic, including the onset of widespread remote work, which has led many companies to downsize their office spaces.

In response to these challenges faced by many office buildings in the city of Chicago, Mayor Brandon Johnson has supported a plan to provide more than $151 million in public subsidies to convert underutilized office buildings into over 1,000 apartments, 30% of which would be affordable housing.

Available Foreclosures:

Chicago: 1 home available

By Elías DaSilva | 04 de diciembre de 2024.