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mTrust's grip on the Illinois Center, a two-tower skyscraper in Chicago, is weakening despite efforts to resolve debt issues. A foreclosure lawsuit was filed by LNR Partners, Starwood's special servicer, alleging AmTrust defaulted on its $260 million loan for the office buildings at 111 East Wacker Drive and 233 North Michigan Avenue. The lawsuit claims AmTrust failed to pay over $871,000 in debt service payments due in January and hasn't paid the full amount since.

    The default stems from the U.S. Department of Health & Human Services leaving its lease last year, which was the largest tenant at the property. AmTrust's CEO Jonathan Bennett had previously stated that his firm was working towards a resolution to its debt trouble. However, LNR's lawsuit indicates that no agreement has been reached with bondholders.

    The situation adds to Chicago's office market distress, where post-pandemic work-from-home trends and elevated interest rates are affecting property performance. AmTrust owns five other downtown properties, including the severely distressed 135 South LaSalle Street, which is being converted into residential use with city subsidies.

    AmTrust had committed $100 million to upgrade its Chicago office portfolio during the pandemic, but vacancies have risen, leading to a decline in cash flow and loan obligations. Bennett stated that AmTrust was working on negotiating a workout with the lender, despite the property's cash flow falling short of loan requirements.

    LNR also claims that AmTrust failed to properly address the 2016 death of co-founder Michael Karfunkel, who had signed as a guarantor for the loan. This could result in additional interest owed by the borrower if the default rate is applied. The property was listed at 46% leased as of June and has generated $20.6 million in revenue this year, but its net operating income is on track to fall below last year's level.