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Thursday, 30 January 2020

Northern Trust Seen Vacating Space at 10 South LaSalle in Chicago

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Commercial Real Estate Direct Staff Report

Northern Trust, which occupies 80,317 square feet, or 10.3 percent of the space at the 781,426-sf 10 South LaSalle St. office building in downtown Chicago, is likely to move out of the 37-story building.

DBRS Morningstar this morning highlighted the potential tenant departure, noting that a broker's listing of space availability at the building included that occupied by Northern Trust, which would be available next January when the financial services company's existing lease matures.

Northern Trust in 2016 had occupied 100,357 sf, but had the option, which it exercised, to shrink its footprint three years ago.

The building serves as collateral for a $105 million CMBS loan, a $75 million piece of which is securitized through Wells Fargo Commercial Mortgage Trust, 2016-NXS5, and a $30 million piece is in WFCM 2016-C32. The interest-only loan matures in early 2026 and pays a 4.43 percent coupon. The loan is the second largest in the collateral pool for the 2016-NXS5 deal.

The rating agency noted that nearly 216,000 sf at the building was listed as available, indicating a nearly 28 percent availability rate. The building last November was listed as having an 84.3 percent occupancy rate. The increased vacancy comes as the Central Loop, the submarket in which the building sits, is projected to see negative absorption this year and next.

DBRS Morningstar also noted that markets surrounding the Central Loop are poised to see new space come online, which could make it challenging to retain or attract tenants to Central Loop properties.

But the rating agency noted that the property's owner, Feil Organization, had a substantial equity investment in the property, mitigating any risk of default. It also said the property benefits not only from its large number of tenants - it had 91 in 2016 - but also from its proximity to mass transit. That, and Feil's experience ought to help in backfilling any vacancies that come up, it said.

Nonetheless, DBRS Morningstar placed the loan on its Hotlist, as a heightened credit risk.

During the first half of last year, the property was on track to generate $8.2 million of net cash flow, according to servicer data compiled by Trepp LLC. That compares with the $10.7 million it generated in 2016, when the CMBS loan was originated. But it's still three-quarters more than needed to fully service the loan.

Comments? E-mail Orest Mandzy, or call him at (267) 327-4281.



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Additional Info

  • Syndicate to Realpoint: No
  • Cities: Chicago
  • States: Illinois
  • Sector: Office
  • Subject: Leases (LSE)
  • Private: No
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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