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Evanston apartment tower hit with foreclosure suit

Posted on July 05, 2009

Samantha Sleevi and Thomas A. Corfman, June 24, 2009

(Crain’s) — A pioneering effort to develop a 221-unit apartment building on the scruffy border of Evanston and Rogers Park has been whacked by a $38.2-million foreclosure lawsuit.

PNC Bank alleges that a venture that includes a sister company, investment giant BlackRock Inc., and the estate of Schaumburg developer William J. Walsh, who died last year, failed to make the April interest payment on a construction loan for Howard Street Station, 413-421 Howard St. in Evanston.
The 17-story building is next to a CTA rail yard on a stretch of Howard Street that has undergone a bit of a revival in recent years.

But since Howard Street Station opened in July, it has struggled to attract tenants or command top rents.
The occupancy rate is just 61%, says Daniel Hyman, president of Chicago-based Millennium Properties R/E Inc., the court-appointed receiver of the property. Meanwhile, rents average about $1.81 a square foot, below the average of $1.89 a square foot for the entire North Shore suburban submarket, according to a report by Chicago-based Appraisal Research Counselors.

In addition to missing the interest payment, the venture also failed to make payments due on hedging agreements apparently intended to protect against a spike in interest rates, according to the complaint, filed June 1 in Cook County Circuit Court.

That default adds another $6.6 million to PNC’s claim, bringing the total amount due to almost $45 million, including unpaid interest and other charges. The loan wasn’t scheduled to come due until November.

Attorney James M. Crowley, a partner at Chicago-based law firm Crowley & Lamb, who represents PNC, declined to comment.
Also named in the case are Jay B. Weis and Erik Weis and their Minneapolis-based construction company, Weis Builders Inc., who allegedly guaranteed up to $3.1 million of the loan. The Weises could not be reached for comment.


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Mr. Walsh’s estate is also named as a defendant because of a similar, $3.1-million guarantee by Mr. Walsh, the former president of Bristol Chicago Development LLC.

Thomas G. Opferman, a partner in the Chicago office of law firm Sonnenschein Nath & Rosenthal LLP, who represents Mr. Walsh’s estate, did not return a call.

A spokeswoman for BlackRock, which is not named as a defendant in the case, declined to comment. Another venture backed by the firm was recently hit by a $33-million foreclosure suit on another property.

Pittsburgh-based PNC Financial Services Group Inc. is the parent company of PNC Bank and a significant shareholder in BlackRock.
Issued in November 2006, the original construction loan of $38.4 million was divided into two notes: one for $15 million held by Rosemont-based Banco Popular North America, and the other held by PNC for the balance. In filing suit, PNC is acting as Banco Popular’s agent, according to the complaint.
Despite the slow start, the building offers several strong features, including lake views, an exercise room and heated indoor parking, Mr. Hyman says. Each unit has a washer/dryer and a balcony, he added.

“It’s a great all-around package,” he says.

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