Bruce Stern Faces Suburban Chicago Office Foreclosure

Bruce Stern and his lender for a suburban Chicago office campus are the latest victims of the commercial real estate fallout as another foreclosure lawsuit takes aim at a landlord.

Stern’s New Jersey-based firm Red River Asset Management owns one of two adjacent office buildings in western suburban Lombard, and the landlords of both have been plunged into distress in recent years, property records show.

A joint venture of Red River and its Dallas-based equity partner Lincoln Property Company was hit with a foreclosure complaint last month by its commercial mortgage-backed securities lender for the 174,000-square-foot building at 701 East 22nd Street.

The suit claims the venture defaulted on a $15.2 million loan tied to the building, which it bought in 2017 for more than $23 million. The structure is connected to a separately owned 229,000-square-foot building at 747 East 22nd. It also went through a tumultuous foreclosure lawsuit that led to Utah-based lender Reef Capital seizing it from a previous owner that defaulted on a $16.9 million loan.

The more than $32 million in failed debt deals accentuate the challenges facing suburban office markets across the nation, as declining property values and mounting loan defaults have riddled landlords and their creditors. In another big loss on a west suburban Chicago office deal, New York-based Ashley Capital in April paid $10 million for the 183,000-square-foot property at 2001 York Road in Oak Brook, a dramatic 71 percent less than its sale price 12 years ago.

The loan to Red River and Lincoln for the Lombard property was slated for repayment on Nov. 6, but has since been transferred to special servicing due to the joint venture’s inability to meet its financial obligations. The borrower explicitly acknowledged its inability to pay off the debt upon maturity, prompting action from the debt’s special servicer, LNR Partners, a subsidiary of Starwood.

The property was acquired by Red River and Lincoln Property in 2017 for $23.4 million from DRA Advisors. Since then, the venture has struggled amid plummeting demand for office space exacerbated by the ongoing effects of the pandemic. The suburban vacancy rate, now at 31 percent, has surpassed even downtown Chicago’s near-record-high vacancy levels.

The neighboring building, at 747 East 22nd, was previously managed by an entity called Manila Coles with ties to Frank Asante-Kissi. It succumbed to foreclosure proceedings led by Reef a couple of years ago and still struggles with vacancy despite tenants like the Department of Homeland Security and the state of Illinois.

Efforts to salvage 747 East 22nd included plans for a data center conversion, though that project failed to materialize before the onset of foreclosure proceedings. Meanwhile, the situation at 701 East 22nd Street remains dire, with occupancy rates plummeting from over 80 percent to just over 50 percent within the past year, according to loan data.

Red River didn’t return requests for comment, and Lincoln Property declined to comment. An attorney for their lender didn’t return a request for comment.

Red River and Lincoln Property have been on the other side of distress during the CRE downturn. Lincoln recently acquired a large office complex in Playa Vista, California, at a steep discount following a previous owner’s loan default. Red River, meanwhile, purchased an office property in Evanston in 2023 at a reduced price compared to its previous sale in 2011.