Jonathan Holtzman is facing a second eight-figure foreclosure lawsuit over Chicago apartment deals gone wrong.
The head of Michigan-based City Club Apartments and other investors involved in the ownership are at risk of losing a 190-unit property in the Loop to their lender, which filed a $69 million foreclosure lawsuit against the landlords this week, Cook County court records show.
San Francisco-based lender Prime Finance alleges the ownership, which also includes Chicago-area developer Wayne Moretti of Lexington Homes, missed its June loan maturity date, after taking out a $66 million loan in 2022 using the property, at 63 East Lake Street, as collateral.
The complaint represents one of the largest cases of multifamily distress in Chicago, joining the $80 million foreclosure of a South Michigan Avenue property that was resolved by its lender, Ares, seizing the property earlier this year.
It’s also at least the second Chicago multifamily foreclosure suit a Holtzman-led venture has faced in the last two years. In March, Old National Bank sued Holtzman and an LLC he backed that owns the 21-story, 147-unit multifamily property at 860 North DeWitt Place in the Gold Coast, alleging the ownership defaulted on a $25 million debt, with $22 million still owed. That case is still playing out in court, records show, with a receiver in charge of operating the building until its resolution.
Holtzman and his firm didn’t respond to requests for comment, and neither did attorneys for Prime Finance. Moretti also didn’t return a request for comment.
Whether Prime’s East Loop takeaway attempt from Holtzman marks a new phase in the commercial real estate distress facing Chicago investors remains to be seen, as lenders have flagged several large apartment deals for concerning performances in recent months. That includes the Holtzman-owned Fisher Building City Apartments at 343 South Dearborn Street, where there’s a $28 million floating-rate loan maturing in 2027. Debt service costs on that deal are outstripping revenues, loan data shows, meaning the landlord is having to kick in cash out of pocket to meet debt service obligations.
Meanwhile, the city’s office landlords and their lenders are still working through a much larger historic wave of foreclosures, short sales and turnarounds in that sector.
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Holtzman has long been involved with the property, which was originally built in 1927. He helped convert from an office building into housing in 2006, and in 2017, had a falling out with a previous partner in the ownership of the building, according to previous news reports.
Holtzman and a New York-based firm called Bluerock sparred over the value of the building when Holtzman moved to buy out its partial interest in the property in 2017. He did so at a nearly $70 million valuation, meaning the property has likely lost value since then given interest rate hikes of the past two years and the ownership’s apparent inability to sell or refinance in time to satisfy the debt owed to Prime.