Fannie Hits Michael N. Lerner with Foreclosure

Chicago landlord Michael N. Lerner has a new opponent in court after settling multiple contentious lawsuits with his parents.

Fannie Mae is now coming after Lerner, who is called Nathan by his parents. His father is Michael J. Lerner, a prominent real estate developer whose firm MCZ Development has built large apartment complexes in Chicago, Kansas City, and Washington, D.C.

Fannie alleges an entity called Bosworth Acquisitions LLC, managed by Nathan Lerner, is in default on an $8.5 million loan secured by a 24-unit property at 1636 North Bosworth Avenue near the Kennedy Expressway in West Town.

The numerous disputes between Nathan and his parents, Michael J. and Jamie Lerner, played a role in the default, because it led to the appointment of a receiver over a portfolio of Chicago apartment complexes that the family jointly owned, Fannie said. Bosworth failed to make monthly debt service payments to Fannie starting May 1, 2024. There’s more than $8.3 million ($346,000 per unit) still owed by the landlord, according to Fannie.

The mortgage giant’s lawsuit against the younger Lerner’s venture marks his latest difficulty in Chicago’s real estate market despite his roles in significant transactions. He owned a stake alongside @properties founders Thad Wong and Mike Golden in a Fulton Market development site that they sold to Miami-based Crescent Heights for $35 million in 2023.

That deal — which will allow Crescent Heights to build a 52-story apartment skyscraper — revealed the rift between Nathan and his father, which has since grown wider. The elder Lerner sued his son in 2023 in an attempt to usurp the equity the younger Lerner had in the deal.

That complaint was dismissed through a private settlement, but a trust in the name of Nathan’s mother, Jamie Lerner, brought additional lawsuits against her son in the ensuing months. Attorney Adam Rome represented the parents in several of the lawsuits concerning the son. Neither Rome, Nathan Lerner, nor other attorneys that have represented Nathan’s companies returned requests for comment. Fannie and its lawyers with the firm Dentons also didn’t return a request for comment.

The disputes centered on claims that Nathan had “misappropriated millions of dollars” from real estate ventures in which he and his family members each had stakes, including by selling property and taking out loans.

The infighting led to several troubled real estate deals, including one in which a court-appointed receiver for a portfolio of North Side rental complexes was forced to reverse a deal and return earnest money to a would-be buyer after a settlement between mother and son was reached in March. The receiver, Matthew Brash of Newpoint Advisors, declined to comment.

The lawsuits also forced Nathan to seek bankruptcy protection for an LLC that owned a 25-unit property at 1741 North Western Avenue in Bucktown. It was sold to Robert Sekula’s firm North Park Ventures for $6.3 million ($252,000 per unit) in December to resolve a foreclosure suit over a $5 million loan. North Park didn’t return a request for comment on the deal.

Even well after the sale, the bankruptcy case brought out an allegation from the father that Nathan “has a history of using company funds for personal expenses.”

That statement was made in an attempt to prevent Nathan from claiming he was owed a little more than $573,000 out of the Bucktown property’s sale, however the father’s objection to that claim was eventually withdrawn, and it was allowed, though it’s unclear if Nathan was able to collect the full amount out of the sale proceeds. An attorney for the LLC that entered bankruptcy protection declined to comment.

The conclusion of the bankruptcy case didn’t end the family feud, though. In recent weeks, the son and mother’s trust have been jousting over a Heartland Bank & Trust account that holds at least $1 million. The account was pledged as collateral in 2019 to secure a $27 million loan from Heartland that allowed MCZ to convert a former Andersonville hospital building at 5700 North Ashland Avenue into a 155-unit rental complex. The property was sold for $54 million in 2023.

But as recently as February, the mother’s trust and Nathan have been fighting over which of them should receive the pledged account, with each of them threatening to sue Heartland if it releases the account to the other. Heartland sued both of them asking the court for guidance on how to handle the dispute, but it was dismissed in recent weeks as the mother and son came to a private settlement.

Brash’s receivership over four North Side properties totaling 77 units owned by the Lerners — at 1752 West 18th Place, 1338 West Cullerton Street, 5137 North Broadway and 1636 North Bosworth Avenue — also ended through a private settlement between Nathan and his mother’s trust in March, court records show.

But his receivership included a dramatic moment. With court approval, Brash hired the brokerage Kiser Group to sell the properties, and struck an $8.6 million deal for the Broadway building while obtaining several offers for the others. But the sale and further marketing was canceled following an emergency court order rescinding the receiver’s authority to sell real estate, apparently as Nathan and Jamie Lerner worked toward a settlement agreement. Earnest money was returned to the prospective buyer.

Still, it took a couple attempts for the settlement to gain a judge’s approval. Cook County Judge Renee Jackson in February declined to approve the settlement, citing the Jamie Lerner Trust’s allegation that Nathan “previously engaged in fraud, misconduct, loss and/or waste” for claiming that removing the receivership could jeopardize the properties until certain issues are resolved.

Because the various settlements between Nathan and his parents are shielded from public court records, it’s unclear what held the judge up from approving the settlement at first or how the agreement was altered between February and April, when Jackson ultimately granted the deal.