canada africa partner reservation AmTrust’s Illinois Center is facing shortfalls on a $248 million loan

AmTrust’s Illinois Center is facing shortfalls on a $248 million loan


AmTrust RE’s massive riverfront office tower complex in Chicago is struggling to stay afloat amid ongoing cash flow problems, leaving the landlord unable to pay debt service on its $248 million loan, according to Morningstar Credit.

The credit rating agency reported this month that the loan tied to the Illinois Center, a two-tower, 2.1 million-square-foot property at 111 East Wacker Drive and 233 North Michigan Avenue, had been placed in special servicing and facing was with “ongoing monthly payments”. shortages.” At the end of last year, the building was 48 percent occupied. A loan is generally sent to a special servicer when it seems likely that the borrower will be unable to pay the debt.

However, AmTrust has no plans to transfer ownership, according to Jonathan Bennett, president of its real estate division.

“As vacancy rates have increased in recent years, the property’s cash flow has begun to lag behind loan obligations, but we are actively working to negotiate a resolution with the lender,” Bennett said through a spokesperson. “We continue to see many upsides in real estate and have several concepts for significant value creation once we reconfigure the capital stack.”

AmTrust bought the Illinois Center in 2015 for $376 million, when the complex was 70 percent leased. The property rapidly deteriorated in 2022, generating nearly $15.9 million in net cash flow, slightly above the $15.8 million in debt service payments for the year but significantly lower than the $23.9 million in net cash flow in 2019, according to loan records .

There is a balance of about $248 million on a loan from CitiGroup for the two-tower property, which is set to mature in a year. The loan was bundled into a package of other commercial real estate debt and sold to investors in commercial mortgage-backed securities, exposing details of the property’s performance to the public.

The property is one of many experiencing a decline in office rent and foot traffic due to the pandemic.

The U.S. Department of Health and Human Services dumped its roughly 170,000-square-foot space at the Illinois Center last year. In the same month, the complex lost its second largest tenant, Bankers Life & Casualty.

When the tenants left AmTrust, which owns five other towers in downtown Chicago, the company signaled it had no intention of throwing in the towel. The company is planning a number of renovations to the complex, including an updated conference center and additional amenities, according to a special servicer that oversees the mortgage.

“Over the coming months, we will work closely with the lender and the specialty servicer to find a path forward that is beneficial to every stakeholder – including the lender, tenants, the borrower and the broader Chicago community,” said Bennett.

Signs of trouble surfaced in February when loan payments were initially reported by Morningstar as 30 days behind schedule. At the time, debt servicers and borrowers explained that the delinquency was due to a minor technical issue that would be resolved quickly. Recent commentary on the loan suggests that this was just a small snapshot of the building’s problems.

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