CHICAGO-The implications aren’t clear, but Joseph Freed & Associates will now have a different lender to deal with on its $145 million defaulted loan for the Sullivan Center in the South Loop. Subsidiaries of Boston-based Winthrop Realty Trust and Toronto-based Elad Canada Inc. have purchased the note from PNC Bank and a collection of other lending entities.
The Winthrop-Elad venture bought the loan for $128.5 million, according to an SEC filing by Winthrop. The loan is in maturity default and has a stated interest rate of LIBOR plus 3.5%, with a 5% default rate. The venture provided a $20 million deposit, with the purchase expected to close by Feb. 8.
Freed was more recently mired with default issues with another downtown Chicago property, the retail portion of Block 37, with Bank of America eventually taking over the building. PNC Bank has reportedly been more lenient with Freed on the default for the Sullivan, partly because the loan structure is more forgiving and partly because Freed has successfully found tenants for the 15-story office and retail building at One S. State St.
Target said earlier this year that it will lease 125,000 square feet of the building’s 200,000 square feet of retail, as one of four urban store format test sites, with plans to open in October 2012. DSW also plans to occupy retail there. The office space includes the School of the Art Institute of Chicago, architecture firm Gensler, City Year and the Illinois Department of Employment Security. The total building is 77% leased, according to the SEC filing.
A spokeswoman for Freed tells GlobeSt.com that the company has no comment about the Winthrop-Elad deal. A source close to the company tells GlobeSt.com that the new loan owners should be satisfied that the business of the building seems to be progressing well. Freed has reportedly been in default since March. It’s not clear what path the new venture will take on the property. A company representative did not return a call for comment.
The building is the former Carson, Pirie, Scott and Co. headquarters, a steel-framed structure designed by Chicago icon Louis Sullivan after the Great Fire of 1871. Carson’s closed in 2007. Freed purchased the building 10 years ago, and has invested more than $190 million in renovations.
National City had the loan for the Sullivan Center, but was taken over by PNC Bank. Other lenders involved include Bank of America, Eurohypo AG, Macquarie Bank Ltd. and the Northern Trust Co. Both Winthrop and Elad will each provide half of the deposit and expenses for the loan purchase.
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