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600,000 SF Suburban Chicago Office Building
The Henley Group (THG) extends big thanks to a collaborative, proactive team and the partnership of a motivated Special Servicer for successfully closing the deal on a 600,000 square foot Class A, LEED Silver Trophy office building in Downers Grove, IL. Read on about the challenges we faced and how the deal unfolded:

CHALLENGE
Prior to hiring THG, KORE Investments' (the Borrower) largest tenant exercised an early termination option causing a 27% drop in occupancy. Earlier that same year, two smaller tenants exercised similar termination options, leaving the potential for only a 66% occupancy rate by fall of 2022.

  • Early termination by the largest tenant caused the “Significant Tenant Termination Trigger” and the resultant cash sweep event.
  • At 66% occupancy, the property would not support paying its debt obligation.
  • While the tenant would continue to pay rent for another 12 months, the nearly impossible hunt began for a new tenant in order to avoid the property value from falling even further.
At only a 66% occupancy rate, it would be inconceivable for the Borrower to pay their debt obligation on this property.
Finding a tenant to take over the mammoth space in a down market was like finding a needle in a haystack. Yet, miracles do happen! Within 90 days after formal notification of the Early Termination Notice, a tenant was identified and a LOI was executed not only to replace the vacated square footage, but also take an additional third of the space previously vacated by the smaller tenants.
With little time left on the clock, so much more was needed:
  • Lender approval of the new tenant and lease.
  • A cure for the “Significant Tenant Termination Trigger.”
  • Raising significant equity to upgrade the Property’s common areas.
  • Immediate access to the excess cash held by the Lender for capital improvements, tenant improvements and leasing commissions.
  • A DSCR Trigger waiver from the Lender as the Property would not pass the DSCR test.
  • An accelerated approval process from the Lender due to the new tenant’s deadline for lease execution.
The new tenant wasn't going to hang out and wait.
Was this deal going to happen??
SOLUTION
We had to hustle! THG put a comprehensive proposal together explaining why this was a great deal for the Lender and underscored the need for a quick review and turnaround. Here's what we emphasized:
  • Current market conditions were not conducive to identifying an office tenant of this magnitude. In fact, the brokers described finding this tenant as a once in a lifetime lease.
  • KORE was willing to invest a significant amount of equity in the deal to upgrade the common areas, building systems, TI, and leasing commissions.
  • KORE was solid and had masterfully navigated their way through a once in a lifetime pandemic, providing full transparency to the Lender every step of the way.
  • A nationally renowned commercial property manager was already in place and would continue to manage the property.

OUTCOME
The Henley Group negotiated and closed in under 90 days:
  • An accelerated Loan Modification
  • Lease approval with the new tenant
  • A cure for, and replacement of, the “Significant Tenant Trigger”
  • Immediate access to the excess cash for common area renovations, building systems, tenant improvements and leasing commissions.

The Loan Modification enabled KORE to execute an 11-year lease with a significant new tenant, be encouraged to infuse a substantial amount of their own capital into the building, and attract new equity to the deal.

We are delighted for all involved for this outstanding resolution. Please do not hesitate to call us to discuss your current CMBS situation, cashflow pressures, and notes coming due.
ABOUT THE HENLEY GROUP

We are expert CMBS Borrower Advocates with extensive experience partnering with clients to catalyze loan resolutions. Dedicated to service excellence and outstanding outcomes, we have worked out over $10 billion in CMBS deals to date. We are proud of the deep relationships The Henley Group has forged with Special Servicers for nearly 15 years. Our unique skill set, patient negotiating style, and understanding of Special Servicing allow us to get results that may not be available to you.
Call David Goldfisher (617) 320-0284
Call David Arthur (617) 719-1087