Foreclosure suit hits Schaumburg office building
(Crain’s) — A Colorado real estate firm that’s taken several blows here during the downturn faces foreclosure in the cutthroat Schaumburg office market, this time on a half-empty building down the road from Woodfield Mall.
A venture of Lakewood, Colo.-based Alliance Commercial Partners was hit this month with a $15.7-million foreclosure suit from Bank of America N.A. after failing to pay off a loan on One Woodfield Lake, a 204,885-square-foot property at 1000 E. Woodfield Road, according to the complaint. The loan matured in January 2011, according to the suit, filed Feb. 14 in Cook County Circuit Court.
The case underscores the difficulty many landlords face as they try to refinance properties acquired at the top of the market. The Alliance venture paid nearly $14.4 million for One Woodfield Lake in 2006, financing the deal with a $15.8 million mortgage from LaSalle Bank, county records show. Office values plunged during the financial crisis in 2008 and 2009 and generally remain depressed.
“You had very aggressive lenders out there and essentially they financed or leveraged income that never was there,” says Art Burrows, senior vice president in the Chicago office of real estate firm NAI Hiffman. “They were underwriting occupancy that didn’t exist that they assumed would happen . . . that’s really what crushed everybody out here.”
A spokeswoman for Charlotte, N.C.-based Bank of America, which acquired LaSalle Bank in 2007, declines to comment. An Alliance executive and leasing agent for the building did not return messages seeking comment.
One Woodfield Lake is just 51.3 percent occupied, down from 82.8 percent in the fourth quarter of 2010, according to real estate data provider CoStar Group Inc. The largest current tenant is a subsidiary of Indianapolis-based health insurer WellPoint Inc., which occupies 60,000 square feet, according to CoStar. Flexera Software Inc. leases nearly 52,000 square feet in the building, CoStar says.
Alliance is no stranger to loan troubles here, surrendering three suburban office buildings to lenders since 2009. An Alliance venture also defaulted last year on a $21.3 million mortgage on the Washington Commons office complex in Naperville, though a loan modification is being negotiated, according to a loan report compiled by Bloomberg L.P.
The foreclosure suit highlights the perils of owning office property in the Schaumburg area, which is awash in space, pushing several large buildings into foreclosure since the crash. Jack Reardon, a leasing broker and senior vice-president at NAI Hifman, does not see an office recovery in the northwest suburbs anytime soon.
“We need to hopefully find another growing industry, and somebody who is going to come out there and take some large chunks,” he says. “At a minimum, (it will take) four-plus years to get to what people would consider a stabilized market.