Chicago is the top market when it comes to CMBS distress (followed by Phoenix and Las Vegas). According to Dallas-based 1st Service Solutions, of the 194 CMBS-financed properties, 53 have a loan-to-value greater than 100% and 112 have LTVs greater than 80%.
Trepp research analyst Sean Barrie (pictured) says over $200B in CMBS loans were underwritten in 2007, often with the companies being granted the loans putting down little to no equity. Because these loans were aggressively underwritten at the time, borrowers won't be able to pay off the loans at maturity without some assistance, and CMBS servicers aren't being flexible when it comes to repayment. Compounding matters, CMBS loans are owned by bondholders, some of which include public pension funds. As appraisals dip on these properties, the LTV will continue to rise. Here are the five biggest Chicago-area properties with an LTV of over 100% maturing in 2015.
1. 123 North Wacker
Location: 123 N Wacker Dr
Loan Holder: A JV of 35 companies led by Sovereign Capital Management.
LTV at Securitization: 71%
Appraisal: $99M
Balance on Loan: $121M
Current LTV: 102%
Thirty-five investors bought into this 30-story, 541k SF building in a TIC investment in 2005. The building's largest investor, Sovereign Capital Management, proposed a recapitalization in bankruptcy court over the objections of the other owners. The building was slapped with a $135M foreclosure lawsuit last December.
2. Bannockburn Corporate Center
Location: 3000 Lakeside Dr, Bannockburn
Loan Holder: Younan Properties
LTV at Securitization: 77%
Appraisal: $20.2M
Loan Balance: $23M
Current LTV: 156%
This three-story, 210k SF office property was part of a $45M foreclosure lawsuit in 2012. C3 Properties now owns the building free and clear of existing debt. NAI Hiffman was awarded management and leasing of the property last August.
3. Hotel Indigo
Location: 1244 N Dearborn Pkwy
Loan Holder: Neighborhood Investment Group
LTV at Securitization: 79%
Appraisal: $15M
Loan Balance: $22M
Current LTV: 143%
This 165-room hotel in the Gold Coast was hit with a foreclosure lawsuit in 2010. Owner Neighborhood Investment Group took out a $27M loan on the property in 2007 and stopped making payments on it.
4. The Landings Shopping Center
Location: 16701-16851 Torrence Ave, Lansing
Loan Holder: Edgemark Commercial Real Estate Services
LTV at Securitization: 78%
Appraisal: $11M
Loan Balance: $19M
Current LTV: 158%
This 183k SF shopping center in the south suburbs has seen better days. Ownership took out a $21M loan in 2000 and the loan matured long ago.
5. 1600 Corporate Center
Location: 1600 W Golf Rd, Rolling Meadows
Loan Holder: Younan Properties
LTV at Securitization: 77%
Appraisal: $12M
Loan Balance: $15M
Current LTV: 177%
Here's another office building Younan bought during the height of the previous cycle that was hit with a foreclosure lawsuit.
