Jonathan Holtzman faces $25M Gold Coast multifamily foreclosure

Old National Bank wasted little time getting a Gold Coast apartment building listed for sale after suing to foreclose on its landlord’s $22 million debt last week.

Real estate investor Jonathan Holtzman’s firm City Club Apartments owns the 21-story, 147-unit multifamily property at 860 North DeWitt Place, and is now up against a countdown to pay off the rest of a $25 million mortgage taken out on the property in 2016 from Old National predecessor First Midwest Bank. 

The property was listed for sale last week with a CBRE team led by John Jaeger. Old National also filed a foreclosure lawsuit in Cook County court late last week to formalize its takeaway from Holtzman’s company.

It’s the latest example of financial distress creeping into Chicago’s multifamily market, which has proven more resilient than many other markets, as some landlords that loaded up on Sun Belt assets during the pandemic face even riskier positions with the rise in interest rates since 2022.

Nonetheless, some apartment deals in the Windy City have started to get turned upside down, as complicated debt deals and ownership structures — including at the Gold Coast City Club property — buckle under the weight of costlier interest rates required to pay off loans taken out during the cheap money era.

The landlord “expresses regret for the current situation affecting residents, lenders, and investors, citing external factors beyond our control,” a spokesperson for City Club said. “An excellent real estate asset situated in a prime location, CCA Gold Coast remains committed to customer service for residents amidst current circumstances.”

The landlord is collaborating on the sale effort with its lender and CBRE, it said. An attorney for Old National declined to comment.

A predecessor to the Holtzman entity that owns the property, called Village Green, paid $19 million for the asset back in 2014, and refinanced it two years later with the $25 million mortgage now headed toward foreclosure. The mortgage amount came to $170,000 per unit.

How much an outside bidder at a lender-driven auction might be willing to pay for the Gold Coast building is unclear. Its value has been suppressed by a ground lease that requires regular payments to a trust that separately owns the land beneath the structure. The ground landlord, whose beneficiary is unclear from public records, split off the building from the property decades ago, and the lease is scheduled to last another 36 years, according to records from when Hotlzman’s firm bought it in 2014.

To notch maturity date extensions and a forbearance agreement for the loan, Holtzman’s company paid down $1 million or more in principal owed on the debt multiple times during the throes of the pandemic. The lender in 2020 agreed to defer payments for a period of time as the health crisis accelerated, and the maturity date was extended multiple times starting in 2021, in exchange for Holtzman paying down principal.

By January 2023, the borrower was in default of the property’s loan, as it hadn’t repaid the debt by its maturity and had failed to take in enough revenue from the property to cover debt service costs, the lawsuit alleges.

But the extra time so far hasn’t led to a capital partner willing to help Holtzman pay off the Old National debt to allow him to keep a stake in the property.

Editor’s note: This story has been updated to add a statement from Holtzman’s company City Club Apartments.

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