Member News

Trading Alert: Huge Chicago Office Loan Said to Be Modified

According to this morning’s Commercial Mortgage Alert, the CMBS loan backed by the 1.7 million square-foot Chicago office at 131 South Dearborn (also known as the Citadel Center) has been modified. The piece notes that Angelo, Gordon & Co. and Hines have recapitalized the property with a pledge of $50 million of new equity.

The $472 million in CMBS debt has been modified as well. The new terms split the loan into a $400 million senior note and a $72 million hope note. The maturity date on the loan has also been extended by four years. In addition, a $50 million mezz loan will be cancelled.
These changes are now reflected in the Trepp model. JPMCC 2007-CB18 and JPMCC 2006-LDP9 each have a $236 million piece of the loan, which now shows up as bifurcated in those deals. The respective pieces make up 8.16% of the CB18 deal and 8.43% of the LDP9 deal.

For the JPMCC 2007-CB18 deal, the difference in average life is meaningful for several tranches when comparing a no-prepayment, no-default scenario before the modification (the “0/0” scenario) to that same scenario, but with the new four-year extension factored in for 131 South Dearborn. In particular, the A-J, B and C classes have average life extensions of anywhere from 1.5 years to 3.75 years.
Using the same comparison for the JPMCC 2006-LDP9 deal, the A-J and B classes receive average life extensions of anywhere from 2.0 years to 3.0 years.

We’ve written about this loan several times in the past. In April 2014, we noted that law firm Seyfarth Shaw would be leaving the Chicago office. A month later, the CMBS loan was sent to the special servicing. In early 2015, the value of the property was lowered from its securitization level of $590 million to $400 million.
Seyfarth Shaw is the largest tenant in the building with over 20% of the square footage. The firm’s lease runs until 2022 but it has an option to terminate the lease in 2017. The firm planned to move to the Willis Tower where it will reduce its footprint by about one-third of its current tally. Namesake tenant Citadel was once the property’s largest occupant, but the firm shed a large part of its space over the last few years.

Compliments of Trepp – a member of the EACCNY