Millbrook gives up suburban office keys to lender, avoids foreclosure
Millbrook Real Estate has given up on a big office complex in Chicago’s western suburbs.
Millbrook, a specialist in suburban office investments, handed the keys to the Arboretum Lakes complex of office buildings, in Lisle, to its lender. The move highlights the bumpy road faced by office landlords and their lenders as higher interest rates and waning demand crush borrowers,
The structures, spanning more than 807,000 square feet, were taken over by an affiliate of Voya Financial, via deeds in lieu of foreclosure, according to DuPage County property records cited by CoStar News, which first reported the lender’s takeaway.
Voya had provided nearly $60 million in loans for the buildings, and the maturity of those debts next year prompted Millbrook to take preemptive action to evade a formal foreclosure lawsuit. The voluntary surrender, an alternative to forced seizures in court, has become more common as property values decrease, interest rates rise and other financial obstacles emerge for commercial real estate players.
Previously, the lender and property owner tried working cooperatively to sell the assets. Cushman & Wakefield listed the campus for sale in June, when the five-building campus was 27 percent vacant. With no offers that would have paid off the debt in full — or at least enough of it to satisfy Voya — the lender decided to take possession of the buildings.
In a challenging lending environment, many property owners and lenders in the Chicago area have been collaborating on sales, with lenders offering financing to buyers to minimize losses on loans.
Millbrook acquired the properties in 2009 for a little over $43 million. The complex was later refinanced with loans from the Voya affiliate in 2014 and a $6.2 million loan from Lake Forest Bank & Trust for a building still owned by Millbrook.
Millbrook’s surrender aligns with the growing trend of deeds in lieu of foreclosure, particularly in the office sector. Office landlords accounted for 43 percent of all deeds in lieu during the second quarter, reflecting the increasing struggle to refinance properties, CoStar reported. Deeds in lieu are making up a growing proportion of all foreclosures, rising from 6 percent in the first half of 2022 to 33 percent in the first half of this year.
