Chicago CMBS Foreclosure Hits Lowenstein Apartments

Raphael Lowenstein’s financial troubles are deepening in the multifamily market on the South Side of Chicago.

After offloading a Kenwood apartment complex earlier this year amid mounting distress in his real estate portfolio, the controversial landlord has been hit with a $35 million foreclosure lawsuit for a 116-unit property in Bronzeville, Cook County court records show.

Atlanta-based Trimont and Miami-based LNR Partners, which are loan servicers representing trustees for bondholders in commercial mortgage-backed securities, filed the suit last week over Drexel Terraces, a four-story complex at 4830-4848 ½ South Drexel Boulevard. The complaint alleges the Lowenstein entity that owns the property stopped making monthly loan payments in December.

As of late March, the borrower owed nearly $34.9 million in unpaid principal, default interest, late fees, and a $2 million prepayment premium. The original loan for $31 million was issued by Morgan Stanley in February 2024 before the debt was pooled with other commercial property loans and packaged into the CMBS deal.

Now, LNR is aggressively seeking to strip Lowenstein of control. A motion filed May 15 requests that the court appoint Matthew Tarshis of Frontline Real Estate Partners as the property’s receiver, which would be installed as the de facto landlord tasked with managing and stabilizing the apartments while the foreclosure litigation plays out. Frontline frequently steps in to turn around distressed multifamily properties in violation of local buildings codes during lender disputes across Chicago.

Loan servicer data on the Drexel Terraces deal from this year portends a staggering loss of equity value at the complex. When the loan originated in early 2024, Drexel Terraces appraised at $50.2 million. A new appraisal conducted last month valued the property at just $31 million, erasing more than $19 million in presumed value in just 26 months, public loan data shows.

Despite operating at 99 percent occupancy at the end of 2024, the property’s cash flow was abysmal. Net operating income generated that year was only $1.14 million — less than half of the $2.54 million projected by the lender during underwriting. The property’s debt service coverage ratio plummeted to 0.57, meaning it was bringing in only a little more than half the revenue needed to cover debt payments.

Cook County court records show Lowenstein’s company initiated at least 19 eviction lawsuits against tenants of the property since 2024, with at least four still open and proceeding through the legal process. It’s unclear whether that volume of evictions caused the alleged loan default, or if that number was rather accounted for by the parameters of the borrower’s and lender’s underwriting.

Lowenstein didn’t return multiple requests for comment, and neither did attorneys for Trimont and LNR.

The foreclosure is just the latest chapter in an ongoing spate of loan workouts for Lowenstein and his brother, Ariel, who built up a South Side rentals portfolio several years ago under the 312 Property Management banner. The Lowensteins in February sold a Kenwood apartments property for $12 million — a solid gain from their previous purchase price of $6.1 million in 2020. That sale closed as 312 maneuvered through the Drexel Terraces distress, which followed delinquencies the Lowensteins previously allegedly faced on $54 million-worth of South Side multifamily loans that surfaced in 2024.

Most of that loan trouble was erased later in 2024 when they scored the $31 million loan from Morgan Stanley for the Drexel Terraces property, though that debt, too, has now fallen into foreclosure.

The brothers’ properties have been previously plagued by tenant complaints, city code violations and habitability lawsuits. Reflecting those operational struggles, the new foreclosure suit also names the City of Chicago and an unpaid plumbing contractor as defendants to wipe out junior administrative and mechanic’s liens filed against the Bronzeville property.