Crescent Heights has relinquished a South Loop development site that was poised to become a twin apartment tower next to its 76-story Nema Chicago, as distress symptoms permeate the city.
The Miami-based firm surrendered the lot at 1201 South Michigan Avenue via deed-in-lieu of foreclosure, allowing an affiliate of Mexican lender Grupo Financiero Inbursa to take control of the property, Crain’s reported. Crescent Heights had been trying to sell the 43,000-square-foot parcel since last summer, with plans to use the proceeds to settle its debt. The property is zoned for a skyscraper rising up to 900 feet — almost as tall as the 800-unit Nema, which was completed in 2019.
Crescent Heights’ inability to land a buyer stands out given the strong apartment demand in downtown Chicago, where Class-A apartment rents were up 2 percent year-over-year at the end of 2023, the outlet reported. High borrowing costs and tough lending standards have made it tough to get projects off the ground, possibly deterring prospective buyers.
Most of Chicago’s foreclosure cases and other distress symptoms have been concentrated in the office sector since last year amid record-high vacancies and spiked interest rates. However, distress is starting to rear its head in Chicago’s multifamily market.
In January, an affiliate of Los Angeles-based Ares Management filed an $80 million foreclosure lawsuit against the owner of the 199-unit South Loop building at 1411 South Michigan Avenue. Real estate investor Jonathan Holtzman was recently hit with a $25 million foreclosure suit, after failing to pay off debt on the 147-unit property at 860 North DeWitt Place.
Crescent Heights bought 1201 South Michigan in 2012 for $29.5 million, financing the acquisition with an $18.3 million loan from Grupo Financiero. The firm later refinanced the property in 2016 with a $30 million loan from the same lender. The loan, originally set to mature in March 2019, was extended multiple times and was due to expire last August.
—Quinn Donoghue
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