T
he potential loss of John Murphy's suburban Chicago office deal is at risk due to a sudden tenant departure this spring. Rosemont-based bank Wintrust has filed a $22.1 million foreclosure lawsuit against an entity tied to Murphy's development shop, Murphy RES, late last month. The lawsuit seeks to take control of a Class B office building located at 2122 York Road in Oak Brook, DuPage County.

    Murphy had sued Oak Point University last month to evict them from the building, which they won. However, Oak Point's sudden closure shocked its students earlier this year. The healthcare-focused educational institution had leased about 84,000 square feet in the 126,000-square-foot building, which was constructed in 1978.

    Oak Point, which was founded over 110 years ago as the West Suburban Hospital School for Nurses, has provided few details about its sudden demise. Meanwhile, its landlord now faces the possibility of losing the building after investing over $10 million in equity and taking on $22 million in debt from Wintrust in 2019 to fund its turnaround.

    The lawsuit highlights the risks of relying on large tenants in small buildings, as well as the challenges faced by the suburban Chicago office market, which has a vacancy rate of around 30% and financial distress in certain areas due to interest rate hikes and low demand.

    Murphy, Oak Point, and an attorney for Wintrust did not respond to requests for comment on Monday. The building was renovated by Murphy in 2020, with Oak Point serving as its anchor tenant. The remaining 43,000 square feet was leased to physical therapy company Athletico. Murphy bought the building for $15 million in 2019 when it was only 50% occupied.

    Wintrust's lawsuit alleges that Oak Point's departure has breached the loan terms with Murphy, as they were required to consistently make their rent payments. The amount of rent Oak Point was paying and obligated to continue paying Murphy is unclear from the publicly available documents. Wintrust has requested the court appoint David D. Onion of Chicago Capital Holdings as the property's receiver to manage the building while the litigation proceeds.

    Despite this obstacle, Murphy continues to forge ahead with another project in the Chicago suburbs. They recently acquired a property in Winnetka for $14 million after the previous owner struggled with development plans and fell into financial distress. Murphy and Christopher Merrill, CEO of real estate investment firm Harrison Street, plan to build high-end rentals costing tenants $7,000 to over $12,500 per month.