One of Chicago’s biggest developers looks like it will miss a second payday for a 500-unit luxury rental tower in Streeterville.
Related Midwest and its investment partner, an arm of union federation AFL-CIO, became the target of the second foreclosure lawsuit filed this week by lenders seeking to recoup debts tied to large Chicago apartment properties.
Life insurance company MassMutual on Thursday filed the $175 million foreclosure complaint against the Related-led venture that owns the 47-story building at 500 North Lake Shore Drive, claiming the landlord failed to pay off any of the loan’s principal by its April maturity date.
The lender granted Related and the AFL-CIO Building Investment Trust some extra time to try to refinance the building with a forbearance agreement signed this spring, but the landlord still couldn’t pull off a new deal, the lawsuit indicates.
Related Midwest is in the process of refinancing the property, and it expects the lawsuit to be resolved by the deal as soon as today, a company spokesperson said. The firm didn’t provide further details about the anticipated loan amount or the potential lender. An attorney for MassMutual didn’t return a request for comment.
Its lawsuit came on the heels of another lender this week moving to foreclose on a $69 million Loop apartment complex owned by a venture of investors Jonathan Holtzman and Wayne Moretti, underscoring how multifamily distress has started to tick up in Chicago after previously being mostly contained to the struggling office sector.
For Related and its partner, MassMutual’s request to strip the ownership of the property and take it over, if granted, will only prevent the developer’s second bite out of the apple. The landlord pocketed $75 million in 2014 when it refinanced the asset with the MassMutual loan, by paying off its $100 million construction loan, according to previous news reports. On top of the construction debt Related took on, it invested $57 million in equity in the development project, meaning the MassMutual refinance provided a profit.
The developer’s outlook on Chicago is unlikely to be shaken much by the foreclosure. Just to the south on Lake Shore Drive, Related Midwest is building a two-tower residential project on the infamous site of the canceled Chicago Spire project, with $500 million in construction financing. It started this year on the project’s first phase, a 72-story, 635-apartment building expected to be complete in 2027.
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