One of Hyde Park’s biggest apartment landlords has cashed out of a building in the South Side neighborhood for $24 million as it tries to avoid a $112 million mortgage default.
An affiliate of Englewood, N.J.-based Antheus Capital last month sold East Park Tower, a vintage 10-story apartment building at 5242 S. Hyde Park Blvd., to another New Jersey investor, Blumberg & Freilich Equities, according to Cook County property records.
The investment turned out well for Antheus, which sold the 140-unit building for $23.5 million, or $168,000 a unit, more than double the $11.4 million it paid for the property in 2008, county records show. It’s unclear how much Antheus invested in the building after the acquisition.
Antheus is facing a more complicated situation with a 43-property, 951-unit apartment portfolio it owns in Hyde Park. A $112 million mortgage on those properties comes due April 1. While Antheus’ top executive has said he will pay it off, others aren’t so sure. One red flag: The loan was recently transferred to a so-called special servicer, a firm that handles problem loans, with a warning that it faces “imminent maturity default.”
Morningstar Credit Ratings estimates that Antheus could secure a loan of only about $70 million on the buildings today, leaving a big financing gap. The Antheus executive, Eli Ungar, dismissed that talk in February, calling it “much ado about nothing” and saying he was lining up a new and even bigger mortgage to refinance the portfolio.
It’s unclear if the sale of East Park Tower is related to the loan issue on the other properties. Ungar did not return calls seeking an update.
East Park Tower is the first Chicago-area acquisition for Blumberg & Freilich, which owns properties in the New York area and Arizona, said Ted Silverman, partner at the firm. He said the firm bought the building through a tax-deferred exchange, plowing the proceeds from the recent sale of a New Jersey property into the acquisition. Like homeowners who defer capital gains taxes on a sale if they buy a new home, investors can use so-called 1031 exchanges to do the same thing with commercial property transactions.
But finding properties on Blumberg & Freilich’s home turf has become especially difficult because “so many investors are bidding things up into the stratosphere,” Silverman said. Prices here are more attractive.
“In the New York region, trying to make a yield is a challenging thing,” he said.
Silverman expects to buy more properties in the Chicago area, singling out Hyde Park as one market he likes because of its “eds and meds”—the University of Chicago and its medical center, which help drive demand for apartments in the neighborhood.
“It’s a great formula,” Silverman said.
Built in 1921, East Park Tower is 96.4 percent occupied, and its average apartment rents for $1,260 a month, according to CoStar Group.
The Antheus venture carried a $10 million mortgage on the building that it paid off at the time of the sale, county records show.
As for the $112 million mortgage on the other Hyde Park properties, Antheus told a loan servicer it planned to pay off the debt on or around March 17, according to a Bloomberg loan report. Online county records do not show that the loan has been paid off, but there is usually a lag time between a transaction and the time it gets posted to the county recorder’s website.