R
ialto Capital, led by Jeff Krasnoff, is taking action against a Downers Grove office landlord struggling with a large delinquent loan and a nearly empty building. On December 30, Rialto filed a foreclosure lawsuit against the landlord of a seven-story, 300,000-square-foot structure at 3075 Highland Parkway, which took out a $45 million loan in 2015.

    The case is part of a broader trend of distress in the commercial office property market, driven by plummeting demand from tenants amid remote work setups and rising interest rates. The building's largest tenant, Advocate Health Care, exited when its lease expired in April, leaving it with just 14% occupancy. Rialto alleges that the landlord is past due on nearly $29 million of debt, after accounting for a reserve balance.

    The loan doesn't mature until August 2025, but became delinquent this summer after Advocate's departure. The building's value has likely decreased significantly since the pandemic, with office properties across the Chicago area fetching lower prices than before. Advocate had leased 140,000 square feet and brought in $3.6 million in net cash flow last year, down from $4.9 million the previous year.

    Rialto is seeking a foreclosure sale to seize the asset at auction using a credit bid for up to $28 million. The case reflects broader struggles within Chicago's suburban office market, which is dealing with high vacancy rates and post-pandemic drops in demand. Other real estate investors, including Accesso Partners, have also faced challenges in the market, losing properties through foreclosure sales.