State Street Retail Property Set For Foreclosure Auction, Appraised 80% Lower Than 2013 Valuation
The retail portion of the building at 1 N. State St. is set for a foreclosure auction next week on the heels of a beating in its most recent valuation as Chicago's downtown retail faces significant headwinds.
The 170K SF retail space will go to auction on Monday, according to new CMBS data from Morningstar. An August appraisal valued the property at $19.9M, a 20% reduction from the previous appraised value of $25M in 2023 and 80% below its $101M valuation when the loan was issued in 2013.
The property is made up of 130K SF of retail and 40K SF of storage. The property was reportedly 95% leased as of the end of last year, with major tenants T.J. Maxx and Burlington Coat Factory taking up the lion's share of the space with 70K SF and 60K SF, respectively.
Burlington extended its lease by five years but is paying percentage rents, while T.J. Maxx's lease was set to expire at the end of July. It is unclear whether the retailer will remain in the space.
German American Capital Corp. originated a roughly $60M loan in 2013 to New York-based investor Isaac Shalom. The loan balance is about $48M, according to Morningstar data.
A special servicer took over the loan in May 2023 due to imminent default caused by cash flow issues, despite the property maintaining occupancy above 90%.
The foreclosure auction comes as the city grapples with a retail vacancy rate in the Loop that topped 30% for the first time in 2023, more than doubling its 2019 level of 14.9%, according to an annual analysis from Stone Real Estate.
