Paydown to proceed: Chicago multifamily landlords working out debts

Chicago multifamily landlords have scored refinancing deals in recent weeks as rates stay steady and lenders start to loosen their purse strings, saving some borrowers in desperate positions.

Although Chicago has a relatively strong multifamily market, the past two years of rising interest rates have made new mortgages and refinancing deals less attractive to borrowers and lenders alike. Distress began creeping into the multifamily market in late 2023 with some apartment owners giving their keys back to lenders.

As the credit market thaws, some owners have been able to save properties on the brink of distress, even as new foreclosure lawsuits show that not all are in the clear.

In the West Loop, developer CedarSt secured a new loan for The Duncan, a  260-unit brick complex at 1515 West Monroe Street. The previous loan for the property was watchlisted by credit ratings service Morningstar Credit as it approached its maturity date and the cost of its floating rate debt service was outstripping its revenues.

But CedarSt paid off the $51.5 million loan from a subsidiary of publicly traded Acres Commercial Realty with the help of a capital injection from a large, Midwest-based family office, Real Estate Journals reported. CedarSt secured a new $44 million loan for the property from Citigroup arranged by Berkardia, putting the new debt package at nearly 15 percent below the previous one, demonstrating the rough impact of interest rates on property values.

Representatives of CedarSt and Citigroup did not respond to requests for comment.

Meanwhile, Raphael Lowenstein’s firm 312 Properties scored a new $31 million loan with Morgan Stanley for The Drexel Apartments at 5043 South Drexel Avenue near Hyde Park. It previously held a $21 million loan for the property from Heartland Bank.

“Multifamily operators can succeed if they don’t put themselves in a position where the market dictates the success of their deal,” Lowenstein said.

His firm faced trouble toward the end of 2023 when lender Bellwether Capital Enterprise filed a foreclosure lawsuit over its loan on the Kenwood Residences at 6610 South Kenwood Avenue. The firm hadn’t missed any loan payments but had racked up a series of code violations that triggered a default.

The firm resolved the code issues, Lowenstein said, and will not have to turn the properties over to Bellwether.

Another borrower in Chicago recently refinanced with the help of gap debt from Chicago-based Community Investment Corporation. Local firm Exemplar Capital Group, led by Charles Young, snagged a $25 million first-mortgage loan with Walker & Dunlop for the Granville Apartments near Loyola University, down from the previous $30.6 million debt Walker & Dunlop provided on the property in 2021, when Exemplar bought it for $31 million.

To pull off the refinancing, the landlord also took out just over $7 million in mezzanine debt from the Community Investment Corporation.

Representatives of Exemplar could not be reached for comment and representatives of Walker & Dunlop did not respond to requests for comment.

Not all multifamily owners have been saved by their current lenders or new lenders, however. 

Neil Fink, a New York-based investor who bought a portfolio of South Side apartments for a little more than $5 million through an LLC called Beluga Investments, is facing a foreclosure suit filed in January by Fannie Mae, the government’s mortgage debt backstop that bought the loan note from the original lender Arbor Realty Trust.

Fannie alleges Fink failed to make its monthly debt service payments starting last summer and didn’t pay off the $3.8 million loan attached to the properties at 1434 West 83rd, 8157 South Throop, 211 East 48th and 1334 West 83rd streets by its December maturity date, and is seeking to strip his ownership of the portfolio.

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