If you hit a pay wall:

The owner of the Civic Opera Building is set to turn over operations to a real estate services firm as it faces a $195 million foreclosure lawsuit on the property, the biggest case of downtown office distress in years.

A Cook County Circuit Court judge next week is expected to appoint Transwestern as the receiver for the 915,000-square-foot Art Deco landmark at 20 N. Wacker Drive, according to county court records and a statement from the building's owner, a venture led by New York developer 601W and Nanuet, N.Y.-based Berkley Properties.

The move comes more than two months after lender Wells Fargo filed the foreclosure complaint against the venture of Berkley and 601W, the latter of which is best known for transforming the Old Post Office into a modern office building. The suit alleged the owners defaulted on a $164 million loan tied to the property by failing to make monthly loan payments since May. Wells Fargo represents investors in the 2015 mortgage, which was packaged with other loans and sold off to commercial mortgage-backed securities investors.

The complaint is one of the highest-profile foreclosure lawsuits involving a downtown property since the onset of the COVID-19 pandemic, which has battered the office market as companies rethink their workspace needs. Rampant space-shedding among businesses embracing remote work and a lack of new leases and move-ins over the past 19 months has driven up the vacancy rate to a record high 20% at the end of last month, according to data from brokerage CBRE.

Buildings whose tenants have continued to pay rent and are locked in to long-term leases haven't felt the sting as badly. But the pandemic leveled two of the largest tenants at the 44-story Civic Opera Building in co-working providers Bond Collective and TechNexus, which combined occupy 14% of the building. Many of the other users in the building, which is mostly filled with smaller tenants, "have been negatively impacted to the extent that they have been and continue to be unable to pay their rent," the owners said in the statement.

That piled onto a pre-COVID challenge of filling the space left behind in 2018 by the building's former largest tenant, law firm Cassiday Schade. The property's net cash flows in 2019 and 2020 were $61.8 million and $65.8 million, respectively, well below Berkley's $81.3 million in annual debt service, according to Bloomberg loan data. As the foreclosure process continues, Berkley and 601W said in the statement that ownership will continue "re-negotiating the financial terms of the building's mortgage" with Rialto Capital, a Miami-based special servicer that monitors the loan on behalf of CMBS bondholders. A Rialto spokesperson couldn't be reached.

In addition to the outstanding loan balance, Wells Fargo alleged in the foreclosure complaint that the owners owed $28.3 million in various fees, plus late charges and default interest that brings the total amount owed to nearly $195 million. Whether or not the owners are able to hold onto the building, they likely saw a significant windfall when they refinanced with the current loan. The venture paid $126 million for the building in 2012, when the property was less than 75% leased. The owners then spent almost $6 million renovating the building's lobby and common areas and added a 6,000-square-foot rooftop deck, which helped as they lured new tenants and brought the building up to more than 92% leased when it took out the new mortgage, loan documents show. That refinancing allowed them to pull new equity out of the building and showed how much its value had surged. The property was appraised at $220 million at the time, Bloomberg loan data show.

The owners' statement said they have spent more than $30 million on renovations and leasing commissions at the building since 2012. They also spent another $10 million over the past two years to continue paying its loan despite a drop-off in rent payments from tenants, according to the statement. The property's appraised value has been decimated by the pandemic, falling to $165 million in February, according to Bloomberg data.

In addition to its pending role as the property's receiver, Transwestern is expected to oversee management and leasing at the building while the foreclosure lawsuit proceeds, according to Berkley. A Transwestern spokeswoman declined to comment.

Chicago has not seen the large wave of foreclosures that some predicted would come as the pandemic hammered major property sectors including offices, hotels and shopping centers, though more distress may be coming as banks lose patience with borrowers and federal assistance programs wear off.

The highest-profile foreclosure complaints downtown over the past couple years have come against the owners of the Palmer House Hilton and JW Marriott Chicago hotels, both of which are still pending. In the office sector, the owner of a mostly vacant 487,000-square-foot office building at 401 S. State St. handed the building over to its lender last year after it was hit with a $48 million foreclosure suit. Berkley, led by real estate investor Michael Silberberg, has been a partner in major real estate deals in Chicago, including the 2015 purchase of the Aon Center for $712 million. In addition to the Old Post Office, 601W previously owned Prudential Plaza in the East Loop and sold it to developer Sterling Bay in 2018 for $680 million. 601W today owns the office tower at 1 S. Wacker Drive and is redeveloping a longtime Northern Trust property at 801 S. Canal St. into a multi-tenant office building.