Without Bank of America paying rent, the building’s annual net cash flow fell from almost $17 million in 2020 to well below the $3.3 million it owes annually for debt service, according to Bloomberg data tied to the loan.
AmTrust announced plans earlier this week to spend $100 million renovating its entire 6 million-square-foot portfolio of Loop office buildings to make them more competitive, including 135 S. LaSalle St. But the firm yesterday issued a correction to that announcement, specifying that 135 S. LaSalle St. will not be part of that broader capital improvement plan.
AmTrust President Jonathan Bennett, who took the reins at the firm in September, said in a statement that the firm is “engaging our lender in conversations focused on restructuring the capitalization of 135 S. LaSalle St.” as part of a broader strategy “to modernize and strengthen AmTrust Realty’s commercial property portfolio.”
But a source familiar with the firm’s strategy said AmTrust expects to default on making loan payments, triggering a process that will likely lead the firm to surrender the property to its lender through a deed-in-lieu of foreclosure.
Re-leasing the vacant space in the 87-year-old former Bank of America building might have been a tall order even before the pandemic, when demand for downtown office space was at a record high. But the public health crisis has pushed companies to rethink their workspace needs, with many opting to cut back on space amid the rise of remote work. Downtown office vacancy is at a record high, making it even less likely that AmTrust would be able to find new users for the LaSalle Street building.
AmTrust bought the building from Bank of America through a $188 million sale-leaseback transaction in 2008, financing that deal with a $100 million loan, according to Cook County property records. Almost seven years later, AmTrust refinanced the property with the current $100 million mortgage, though the building’s appraised value at the time had jumped to $330 million, according to property records and Bloomberg data tied to the loan.
Wells Fargo is listed as a trustee for bondholders in the 135 S. LaSalle St. CMBS loan. New York-based Torchlight Investors is listed in Bloomberg data as the special servicer, a group hired to oversee the troubled loan. Neither group could be reached for comment.
AmTrust isn’t the only LaSalle Street landlord losing its massive anchor tenant. BMO Harris Bank next year will follow Bank of America’s lead and leave behind more than 800,000 square feet in adjacent buildings at 200 W. Adams St., 111 W. Monroe St. and 115 S. LaSalle St. for a new namesake tower next to Union Station. The second-largest tenant in the Monroe and LaSalle buildings, law firm Chapman & Cutler, is also moving to the new tower.
Those departures could leave a venture of Seoul-based Samsung Life Insurance with few options as it grapples with its own loan payments.
If AmTrust defaults on its 135 S. LaSalle St. loan, it would add to a recent run of distress among prominent downtown office buildings with big blocks of vacancy. The owners of office buildings at 65 E. Wacker Place and 300 W. Adams St. recently transferred their buildings to lenders rather than facing a foreclosure process. The owner of the Civic Opera Building, meanwhile, was recently hit with a $195 million foreclosure lawsuit, the biggest case of downtown office distress in years.