Despite institutional investors lining up to sell downtown Chicago apartment towers amid solid rent growth, there’s plenty of CRE distress in the pipeline.
Moshe Wechsler’s Emerald Empire is in forbearance on a big chunk of debt tied to a $600 million purchase of Pangea Properties’ 400-building rental portfolio. The 2022 deal made Emerald one of Chicago’s largest apartment landlords, but rising interest rates and shaky property conditions preceded the landlord’s request for a break on payments toward $430 million in Fannie Mae financing. City officials have flagged multiple code violations at Emerald’s buildings, while it remains unclear exactly how much of the large debt package is affected.
Elsewhere in multifamily, Chikoo Patel and partner Shai Wolkowicki are under siege from lenders and investors for nearly $20 million tied to deals from Chicago to Springfield. Patel, who drew tenant ire earlier this year over property conditions in South Shore, is accused of fraud and embezzlement in one case while Old National Bank is pursuing foreclosure on a $16 million downstate deal. Other lawsuits are stacking up, from HUD-funded projects to smaller South Side apartments, spotlighting the risks of opportunistic plays in distressed housing.
In the South Loop, lender ACORE Capital filed a $187 million foreclosure lawsuit against longtime hotel operator Su-Mei Yen, whose family controls the Best Western Grant Park and the Homewood Suites on Wabash. The suit alleges missed deposits and unpaid fees on a loan that’s now swelling by $60,000 a day. Additionally, Chinese EB-5 investors expanded a fraud lawsuit against the Yens to $18 million, claiming their funds were misused and their visa hopes derailed.
It’s brighter in the residential market of Lake Geneva, where wealthy buyers are circling waterfront homes — even when they’re off the market. A six-bedroom home in the Wisconsin getaway’s South Shore Club sold after an unsolicited $10.1 million offer ended the buyer’s two-year search. It’s the latest in a string of eight-figure trades on the lake, underscoring the Midwest’s strengthening pull for trophy-home buyers.
Plus, downtown Chicago’s high-rise multifamily market is a magnet. Brookfield listed its 502-unit Sky55 and an adjacent senior building on South Michigan Avenue, while the State Teachers Retirement System of Ohio put its 481-unit Streeterville tower on the block. Both properties are heavily occupied with rising rents, joining other large complexes recently listed as institutional players test pricing in a supply-starved market.