CA Ventures affiliate late on $75M Arlington Heights loan

Special servicer on workout of debt tied to multifamily property in northwest suburbs

CA Ventures' John Diedrich and SitusAMC CEO Michael Franco with 3401 West Payton Place in Arlington Heights CA Ventures, SitusAMC, Getty, LoopNet)

Sam Lounsberry

Dec 1, 2023, 7:15 AM

An affiliate of CA Ventures has fallen behind on payments for a big debt tied to a recently built Arlington Heights apartment complex, one of many sore spots the Chicago-based development firm and its investors are massaging.

The owner of the 263-unit rental asset at 3401 West Payton Place in the northwest suburb of Chicago is between 30 and 59 days delinquent on the $75 million loan the property secured in 2021, according to credit ratings agency DBRS Morningstar.

The loan was originated by an affiliate of San Francisco-based publicly traded TPG Real Estate Finance Trust with an adjustable interest rate, meaning its debt service payments have likely risen in step with this year’s rate increases by the U.S. Federal Reserve. It isn’t scheduled to mature until late 2024.

The five-story structure’s development was undertaken by an affiliate of CA Ventures known as Springbank, which owned the land and brought the development opportunity to a stable of investors that frequently does business with CA Ventures, according to people familiar with the deal.

Ownership of CA Ventures, which is headed by CEO Tom Scott and claims to own assets totaling $10 billion in value worldwide, has been injecting capital into the asset to offset increased operating costs driven by interest rate hikes. Such efforts have been made in an attempt to protect investors that entered the Springbank project, several of whom have put capital into CA Ventures projects.

CA Ventures itself is not an owner of the Arlington Heights project, the firm’s CIO John Diedrich said.

“We, and our capital partner, are in active dialogue with the lender of this asset now about modifying/extending, and paying down, this loan,” Diedrich told The Real Deal in an email. “Hope to have this resolved over the next couple weeks.”

Loan data shows that the debt’s special servicer, New York-based Situs Holdings, has started overseeing the loan, a move lenders make when borrowers have trouble with repayment. TPG declined to comment and Situs didn’t return a request for comment.

The loan delinquency came to light with CA Ventures on the defense in multiple thorny lawsuits in jurisdictions across the nation. The firm is among an array of multifamily players to encounter angry investors and legal risks stemming in part from difficulty refinancing loans at higher rates. Look for exclusive, wide-ranging interviews with Scott, Diedrich and others tied to CA Ventures in the December issue of The Real Deal, publishing online next week, with print editions hitting mailboxes in coming days.

Jeff Krol, an investment manager for several “friends and family” investors that often work with CA Ventures, is collaborating with Diedrich on finding a solution with the lender. Krol said the landlord was initially protecting itself from larger spikes in its debt service costs by paying for interest rate caps, but added such instruments “only last for so long.”

The apartments opened in 2021, and the property was appraised at $106 million when the loan was issued. Krol said the property is approximately 70 percent leased and the landlord is working to stabilize it. It’s fetching the rents that the developer expected to get when underwriting the project, and it has changed its leasing agent since the property opened, he said.

“The lender seems amenable to figuring out the modification / pay down,” Diedrich wrote. “Most lenders don’t actually want to own assets — this one, just like many in the world today, needs to be resized due to interest rate hikes beyond expectations when the loan was funded.”

Chicago