Chicago Co-Living Firm’s $325 Million Debts for Sale

A Chicago co-living developer is facing a critical test.

Roughly $325 million in nonperforming debt tied to two co-living apartment towers developed by the X Company is up for sale, signaling mounting financial and operational challenges for the once fast-expanding firm, Green Street’s Real Estate Alert reported.

Newmark is marketing the debt on behalf of lender Mack Real Estate Credit Strategies, which holds the loans backing the X Phoenix and X Denver properties. Investors can bid on the loans separately or as a package, with initial offers due June 18.

The $155 million debt on X Phoenix, a 330-unit tower in downtown, consists of a $123 million senior mortgage and a $32 million mezzanine loan, both interest-only and currently in default ahead of their initial September maturity. The debt total amounts to $470,000 per unit. The $170 million loan on X Denver, a 455-unit property in the city’s Union Station North area, also fell into default earlier this year after maturing in January. It amounts to $374,000 per unit.

Founded by CEO Noah Gottlieb, the X Company emerged from Miami-based Property Markets Group, where Gottlieb helped develop the co-living concept before spinning it off into an independent company.

Marketed as a social living brand, its properties combine upscale apartments, co-living suites, coworking spaces and members-only social clubs; the amenities fueled fast growth but ultimately strained the firm’s finances as expansion plans hit headwinds in 2023.

Beyond Phoenix and Denver, the company has two more projects under development in Phoenix — the 352-unit second phase of X Phoenix and the 370-unit Rosie, both set to deliver this year — along with the 475-unit X Houston and the 432-unit X Tampa, slated for delivery in 2026. Closer to home, the firm sold its 99-unit X Chicago last year and recently delivered a 351-unit building in Denver.

Marketing materials suggest the sale offers investors an opportunity to take control of the underlying properties. Mack originated the debt in 2022, providing three-year initial terms with two single-year extension options.

— Judah Duke