Adventus Realty Trust, one of suburban Chicago’s biggest office landlords, is set to lose perhaps every property it owns after yet another lender hit the firm with a foreclosure lawsuit this month.
The British Columbia-based landlord of seven office complexes in suburban Chicago and five in suburban Atlanta has a series of entities tied to those properties making their way through Canadian bankruptcy courts. The overall picture is bleak, with a cumulative claim of nearly $382 million in liabilities and less than $3 million in assets, bankruptcy records show.
Investors in the firm — along with a creditor called Grofondi, which loaned Adventus $36 million — are expected to recover next to nothing.
Several lenders whose loans are secured by Adventus properties that account for more than 4.3 million square feet of offices in Chicago and Atlanta suburbs aim to take the keys to 11 of its 12 properties.
All 11 of those properties are currently in various foreclosure proceedings. The only Adventus property that’s still clear is a 514,000-square-foot multi-building office complex in Elgin, northwest of Chicago. It is 87 percent leased and brought in $4 million in net cash flow last year, loan data compiled by ratings agency DBRS Morningstar shows.
But Adventus is unlikely to be able to hold onto that property or much else as its creditors angle to take over anything they can amid the run of losses on the struggling office portfolio, according to a person familiar with the company.
The latest case of distress for the landlord popped up at the Columbia Center III, a tower in the three-building, 620,000-square-foot complex in suburban Rosemont near O’Hare International Airport. The other two towers in the complex, at 5600 North River Road and 9525 West Byrn Mawr Avenue, are already being pursued by a lender who has proposed the appointment of a third-party receiver to take control of the assets and oversee them while Adventus’ loan defaults are resolved, Morningstar data shows.
A lawsuit filed earlier this month by the bondholders in a securitized debt tied to Columbia Center III said that Adventus has defaulted on a $29.3 million loan. Adventus bought the entire complex for $93 million in 2014, when it was 93 percent leased. Occupancy had fallen to 50 percent, however, by the end of 2022, when the landlord couldn’t take in enough revenue to cover its annual debt service and lost $400,000 for the year on the asset, loan data shows.
Adventus’ plight is a dramatic example of the distress among office landlords facing significant debt loads. Surging interest rates make refinancing or finding buyers able to shoulder the burden nearly impossible at the same as demand from commercial real estate tenants stays below pre-pandemic levels while hybrid and remote work plans remain viable for many.
Those factors “severely impaired Adventus’s liquidity position and put pressure on Adventus’s leveraged capital structure. Adventus’s cash needs were expected to continue to exceed the cash generated by the real estate portfolio for the foreseeable future,” a trustee in the Canadian bankruptcy case said in public filings.
The landlord didn’t return a request for comment for this story, and an attorney for the lender on the Columbia Center III declined to comment.
Separately, Adventus is being sued in a New York federal court for defaulting on loans tied to eight properties, including three others in the Chicago area and five in Atlanta’s suburbs. The lender in that case — which consists of a group of bondholders in a securitized $350 million loan attached to all eight properties — alleged Adventus improperly sent rent revenue to its affiliates ahead of stopping monthly payments earlier this year and failing to pay off its July maturity.
“Borrowers have also engaged in the systematic and unlawful transfer of funds to their affiliates … since the inception of the loan,” the lawsuit said. “Financial records show that Borrowers made numerous large transfers to affiliates as well as payments for their or their affiliates’ benefit. Though the financial records also show transfers from the affiliates to borrowers, their net transfers out are substantial and have caused borrowers to become insolvent.”
The suit goes on to claim that Adventus sent a net total of $93 million from the entities that own the real estate to company affiliates between 2021 and this year, including $3 million that was transferred out after the borrowers stopped making payments on the loan in March.
“Through these transfers, borrowers have misappropriated the rental income from the properties that secure the loan. The magnitude of these transactions is so great that borrowers are not only unable to meet any of their obligations under the parties’ Loan Agreement but also unable to support the basic operating needs of the properties,” the complaint said.
The court appointed Detroit-based Matthew Mason of the firm Riveron as receiver to oversee the portoflio tied to the $350 million debt while the foreclosure case plays out. The properties attached to that distressed debt consist of the first two Columbia Center towers as well as the 304,000-square-foot Crossings complex at 1420 Kensington Road in Oak Brook, and the 203,000-square-foot Cantera Meadows property at 28100 Torch Parkway in Warrenville, plus all five of its Atlanta-area properties.
Mason did not return a request for comment, and neither did an attorney representing the lender seeking to foreclose on the larger loan.
Adventus is also facing foreclosure of a $128 million loan tied to the 870,000-square-foot Riverway office complex near O’Hare, which Cook County court records show a receiver has also been appointed to oversee. And the landlord already agreed to turn over the Oak Brook Office Center, a four-building, 327,000-square-foot asset in the western suburbs, to a separate lender that has had trouble getting bidders to make an acceptable offer at auction since taking keys and putting the asset on the market.
Trustees and receivers appointed to oversee the Adventus bankruptcy case in Canada have disclosed that the landlord has $705 million in outstanding mortgage debt tied to its portfolio.
Adventus last year hired a global investment bank to explore potential merger, sale or recapitalization opportunities, but that didn’t lead to a solution, the bankruptcy filings show. Adventus was also unable to raise new capital when it tried to do so early this year.
Two former Adventus executives who were terminated by the firm in April this year have filed complaints to their Canadian territory’s Director of Employment Standards, the bankruptcy case shows. The status of those claims and who made them is unclear from bankruptcy records filed this fall.
However, former Adventus CEO Rodney Johnston was removed from his position in July, the company said, and Rick Charlton was appointed acting CEO. And in March, Randel Waites resigned from the company’s board in a move that Adventus said was “was necessitated” due to a conflict of interest involving his employer and Adventus.