Blackstone faces $346 million foreclosure on River North office building

Following a movement of buildings being seized by its lenders, a River North office building is on course to join the list. The office building, located at 350 N. Orleans St., is controlled by Blackstone, a New York based private equity firm. Blackstone bought the property for $378 million in 2015 and subsequently spent another $104 million on improvements to modernize and add amenities to the building. However, the firm has been in default on its $310 million mortgage since it matured in 2023. The mortgage is backed by the office portion of the building, and a trustee representing the bondholders in the loan has taken action in an effort to take control of the property.

However,   foreclosure lawsuit, filed last month, has landed the property on a list of distressed office buildings. Ownership of this property, which includes the majority of a building previously known as the Apparel Center, has been unstable since Blackstone failed to pay off its mortgage in 2023. The ownership entity had signaled that when the debt matured it was no longer going to invest in the property.

Wells Fargo soon stepped in as a special servicer to oversee the loan, which had been packaged with other debt and sold off to commercial, mortgage-backed securities investors. The lender had then hired a broker to sell the property, but it never traded. Last summer, following this move, KeyBank became the special servicer and seemed eager to fund new leasing efforts on behalf of bondholders. However, while the foreclosure suit puts bondholders in a position to formally take over the property, it also makes leasing efforts conditional on court approval. Wilmington Trust, an investment company, who had filed the foreclosure complaint on behalf of bondholders, has formally asked the court to appoint an individual from a Dallas based real estate firm as a receiver for 250 N. Orleans St.

In February, Blackstone owed more than $346 million on the mortgage. This amount included the outstanding principal and interest that had accumulated since the loan default. While the building has generated a net operating income of $12.2 million in 2023, according to CMBS loan data compiled by Bloomberg it was not enough to keep Blackstone from defaulting on its loan. However, 250 N. Orleans St. is not the only property struggling with foreclosure suits. Buildings like the One Illinois Center complex and towers at 10 S. LaSalle St are just a few of the larger properties in Chicago whose owners were also served with foreclosure suits.

For more information on Real Estate law, please contact the qualified attorneys at Rock Fusco & Connelly, LLC.