Loan Troubles Plague 2 Loop Buildings As Downtown Office Market Struggles To Make A Comeback
Two office buildings, whose loans were sold off to commercial mortgage-backed securities investors, are on the verge of distress — the latest evidence a decrease in workspace demand and a decline in property values have landlords in [the Loop](https://www.bisnow.com/tags/the-loop) struggling to stay afloat following the effects of the pandemic.
In one instance, a $16.5M loan attached to 216 West Jackson Blvd., a 10-story property, was transferred to a special servicer this month, alerting investors that the mortgage could soon go into default, [according to Crain’s Chicago Business](https://www.chicagobusiness.com/commercial-real-estate/two-loop-office-building-owners-face-potential-loan-defaults).
And, after being transferred to a special servicer in May, a $19M loan matured this month on a 16-story office building at 19 South LaSalle St.
A venture of Chicago-based [Marc Realty](https://www.bisnow.com/tags/marc-realty) paid $22.3M for the 198K SF 216 West Jackson property in 2013 when it was close to fully leased. While the property was put up for sale in February 2020, the predicted $27M bids never rolled in.
According to [Bloomberg](https://www.bisnow.com/tags/bloomberg) data retrieved by Crain’s, the property’s occupancy fell to 62% last year. Its loan was recently transferred to [LNR Partners](https://www.bisnow.com/tags/lnr-partners) of Miami Beach, Florida, due to troubles keeping up with the mortgage, which is scheduled to mature in October 2023.
The one-time Central YMCA Association Building on LaSalle traced a similar path. Investor Ruben Espinoza [bought the 129-year-old building for $22M](https://www.bisnow.com/feature/chicago-equity-raising/chicago-private-equity-100105) in 2019 during a time investments were tanking in Chicago’s CBD.
The 159K SF property struggled, generating only a fraction of Espinoza’s $1.1M debt service payment for 2021. Occupancy also dropped to 56% last year.
Espinoza announced in July he would discuss a possible path forward for the building and its loan, which was transferred to special servicer KeyBank in May. As of today, those plans have not been announced, Crain’s reported.
Neither owner has stopped making payments, per Crain’s, though neither currently generates enough in net operating income to cover annual debt service.
_Contact Erica Scalise at [erica.scalise@bisnow.com](mailto:erica.scalise@bisnow.com)_
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