Loop complex lands $95-million refinancing loan

By Thomas A. Corfman , Oct. 28, 2009

(Crain’s) — A venture that includes former Coca-Cola bottler Marvin J. Herb has obtained a $95-million loan on Hartford Plaza, sidestepping a mortgage crisis on the West Loop office complex.

The five-year loan, issued earlier this month by Wells Fargo Bank to a joint venture of Mr. Herb and Lincoln Property Co., is one of the largest commercial real estate loans issued in the Chicago area this year. The transaction is a sign of how well-heeled investors like Mr. Herb, who sold his Niles-based soft drink bottling company in 2001 for $1.4 billion, can avoid some of the challenges created by the prolonged credit crunch.

Mr. Herb, of Barrington-based Barrington Venture Holding Co., did not return a call requesting comment.

Even though the credit crisis is easing, the deal still comes at a time when few banks are looking to make new loans on major properties and every lender is imposing stricter terms, including requiring more equity.

That’s apparently the case with Hartford Plaza, 100 and 150 S. Wacker Drive, where the new loan is 15% less than a $110-million mortgage put on the property in 2003, when the Herb-Lincoln venture bought the 1.1 million-square-foot development, property records show.

That loan was divided equally between Massachusetts Mutual Life Insurance Co. and Transamerica Life Insurance Co., according to loan documents filed with the Cook County Recorder’s office.

But in February 2008, when the credit markets were already tightening, Transamerica apparently wanted to be paid off, part of a broader withdrawal from commercial real estate lending. As a result, MassMutual increased its loan to $85 million, with Mr. Herb writing a big check to pay off Transamerica, loan documents show. The new loan was scheduled to come due March 1, 2010.

The Wells Fargo loan increased the debt on the property to $95 million, from $85 million previously, but Mr. Herb agreed to guarantee at least a portion of the loan, documents show.

That guarantee may have been a key factor in Wells Fargo’s decision to increase the size of the loan, because such increases are rare in the current market, says David Downey, a managing director in the Chicago office of commercial real estate firm Transwestern, who wasn’t involved in the transaction.

The Oct. 1 refinancing comes after the Herb-Lincoln venture tried unsuccessfully last year to sell Hartford Plaza, pulling the property from the market after receiving offers well below the lofty target price of $275 million.

The Herb-Lincoln venture paid just $147 million for the property in 2003, buying it from a venture that included Lincoln and another investment partner.

Related story: Wacker Drive complex taken off the block

John Grissim, an executive vice-president and head of Lincoln’s Midwest office, and Scott Stahr, a principal in Barrington-based Fulcrum Asset Advisors LLC, which is advising Mr. Herb, didn’t return calls seeking comment.

William Barry, a senior vice-president with Chicago-based Draper & Kramer Inc., who arranged the financing, also did not return a call.

The largest commercial real estate loan issued on a Chicago-area property this year is probably the refinancing of the North Bridge retail development.

Related story: North Bridge owner gets $205M refinancing loan