Another Chicago landlord is facing foreclosure on a LaSalle Street building, but this time it’s a multifamily property with debt problems instead of another beleaguered office tower.
An affiliate of Barings has filed a $74 million foreclosure suit against Aventura, Fla.-based DLC Residential for the 13-story apartment building at 29 South LaSalle Street, Crain’s reported. The foreclosure is a rarity for downtown, where apartment buildings have fared well amid the pandemic compared to the surrounding office buildings.
DLC Residential, a prominent developer in southern Florida’s Miami-Dade area, allegedly failed to pay back a construction loan on the property, which it converted from a vintage office building into 216 apartments a few years ago. The property is 72.2 percent occupied, down from nearly 90 percent occupied when it opened in 2021.
The foreclosure suit adds to a list of properties along LaSalle Street facing similar legal issues stemming from unpaid debts. Those properties, though, are mostly offices, and include 1 and 30 North LaSalle, 10, 19 and 135 South LaSalle and 105 West Adams Street. The Chicago Board of Trade Building at 141 West Jackson Boulevard was the most recent addition to the list when Apollo Global Management took control of the property from a joint venture of Chicago-based Glenstar and Los Angeles-based Oaktree Capital Management last month.
City officials have been encouraging investors to take on office-to-apartment conversions in the heart of the city’s financial district, though such projects can come with surprises, as DLC discovered. Its costs likely ballooned beyond what it expected to have to repay as it discovered it would have to reinforce the building with a wind bracing apparatus to support improvements such as a rooftop pool and court.
The city is likely to offer tax increment financing plans to temporarily freeze property tax increases on improvements, amongst other public incentives, to developers of office-to-housing projects as long as at least 30 percent of the units are affordable.
In October, Truman Tolefree’s Intersection Realty Group spent $19.3 million on the mostly vacant 223,000-square-foot, 24-story office building at 65 East Wacker Place with plans to convert it into 144 apartments.
— Victoria Pruitt