Question 1

What Chicago CMBS loans are at risk for maturity default in 2026?

Accepted Answer

Central Loop Class B and C office from 2015-2018 originations is the primary maturity default cohort. The LaSalle Street corridor, the State Street retail-to-office conversion corridor, and the older Wacker Drive office inventory are the specific sub-markets with the highest maturity default exposure. West Loop office from the 2016-2018 vintage is the second category. Suburban Chicago retail power centers and strip malls with anchor vacancies from 2015-2017 originations represent a third category. Chicago multifamily CMBS is not a meaningful maturity default category given continued performance.

Question 2

How does Cook County's property tax structure affect Chicago CMBS maturity default underwriting?

Accepted Answer

Cook County uses a triennial reassessment cycle with separate reassessment schedules for Chicago and the suburbs. Commercial properties in Chicago are assessed at 25% of estimated market value, compared to 10% for residential, creating a structural commercial tax premium. Recent Cook County commercial reassessment cycles have produced significant tax increases that were not reflected in 2015-2018 CMBS origination underwriting. Buyers acquiring Chicago CMBS maturity default assets must underwrite to current and projected future tax assessments, not to origination proformas, as the tax burden difference can be 15-25% of net operating income.

Question 3

Are Chicago CMBS maturity default office buildings candidates for residential conversion?

Accepted Answer

Chicago has been one of the more active markets for office-to-residential conversion among major US cities, driven by the city's relatively lower office valuations (creating viable conversion economics) and the Illinois state legislature's passage of incentive legislation in 2024. Loop buildings from the 1960s-1980s with smaller floor plates and higher window-to-core ratios are the best conversion candidates. Buyers targeting Chicago CMBS maturity default office should commission a conversion feasibility analysis as part of due diligence, and should engage Chicago zoning counsel early, as the conversion approval process involves multiple city agencies.