Greystone Smacks Lowensteins With Another CMBS Foreclosure

Weeks after a $35 million foreclosure lawsuit hit their prominent Bronzeville multifamily complex, controversial father-son landlord duo Raphael and John Lowenstein are watching another piece of their South Side real estate portfolio crater under the weight of severe financial distress, cascading city code violations and neglected property maintenance.

Greystone, acting as special servicer on behalf of commercial mortgage-backed securities bondholders, filed a foreclosure lawsuit in Cook County Circuit Court on Monday against the Lowenstein-controlled entity 4520-26 S. Drexel Residences LLC. The suit seeks to strip the landlords of control over their 68-unit apartment building at 4520 South Drexel Boulevard in Chicago’s Bronzeville neighborhood.

Financial demands of the court filings are staggering. While the original loan issued by Morgan Stanley Bank in May 2022 was for $15.4 million, contractual penalties have driven the total payoff amount to more than $19.4 million as of June 1, according to the suit. The ballooning tab includes almost $1.6 million in default interest, more than $1.6 million for a yield maintenance prepayment premium and $192,717 in liquidation fees. According to the filings, interest is continuing to compound against the borrowers at a punishing rate of $4,769.72 per day.

The lawsuit exposes a rapid loss of value at the property. As the loan was packed into a CMBS trust shortly after origination, the building appraised at $23.6 million in 2022. However, a new appraisal conducted in March this year valued the property at just $15.6 million — erasing roughly 34 percent of its real estate equity in under four years.

Combined with the $19 million equity wipeout reported last month at their neighboring 116-unit property Drexel Terraces at 4830 South Drexel Boulevard, the Lowensteins have overseen a collective $27 million collapse in property valuations on a single Bronzeville block.

John Lowenstein is a former executive of the sporting goods chain Sportmart, which was founded by brothers Raphael and Ariel Lowensteins’ maternal grandfather and owned by the family until they sold it in 1998, according to Injustice Watch.

Reached by phone Wednesday afternoon, John Lowenstein said he “wasn’t the right person to talk to” about the loan defaults before hanging up, and didn’t return additional requests for comment. An attorney for Greystone didn’t return a request for comment, and neither did Raphael Lowenstein. An attorney for the Lowensteins also didn’t return multiple requests for comment.

Loan data tracked by Morningstar Credit reveals that the property at 4520 South Drexel Boulevard’s cash flow suffered a terminal blow over the last two years.

Occupancy plummeted from 95 percent at the loan’s issuance to 85 percent by late 2024, squeezing rental revenues. Simultaneously, operating expenses spiked due in part to high apartment turnover costs.

By September 2024, the property’s debt service coverage ratio fell into the red at 0.98, meaning the building was no longer bringing in enough income to cover the cost of interest on its loan. The Lowensteins missed multiple payments, but were making them late and trying to send partial payments for months before abandoning their attempts to tread water and completely missing loan payments starting in August, public loan data shows.

But the crisis isn’t just financial — it’s also structural. A July 2024 loan servicer inspection log included in Morningstar tracking data paints a grim picture of tenant living conditions. Inspectors noted “significant evidence of microbial growth,” meaning mold, on the bathroom ceiling of an occupied unit and stretching across common hallways. The property was also tagged with safety hazards, including exposed electrical wiring outside another apartment and a loose, uninsulated electric box hanging above the rear alley gate.

Reflecting these operational battles, the city of Chicago filed five separate building code violation liens against the property between October 2022 and April this year. Local contractors Wess Gate Worker Centers and Chase RC II also filed simultaneous mechanics liens against the property in May 2024, alleging they were left holding the bag for unpaid rehab work.

Greystone, acting as special servicer, has launched a playbook to permanently wrestle the property away from the Lowensteins’ firm, 312 Property Management. While the Lowensteins signed a pre-negotiation agreement claiming they wanted to bring the loan current, Greystone stated in the lawsuit that it refuses to offer any deed-in-lieu of foreclosure mercy, public loan data shows. Instead, lenders have asked a Cook County judge to fast-track a judicial sale, appoint an emergency third-party receiver to seize all building rents, and kick the landlords out of possession.