(Crain’s) — More than a year after foreclosing on a 14-acre development site in Northbrook, a Texas bank is in talks to sell the property to a local venture that wants to build apartments and retail there.
The venture between Chicago-based Morningside Group and Schaumburg-based Crossroads Development Partners LLC would take over the property at Skokie Boulevard and Dundee Road from an affiliate of Beal Bank.
“Nothing’s concluded yet,” said Morningside President and Managing Principal David Strossberg. “We’re working on an agreement.”
He declined to discuss specifics other than saying the two firms plan a mix of apartments and retail on the site, where a previous group led by developer Edward Renko planned a $150 million complex with condominiums, retail and a hotel.
But the real estate market crashed, the project never got off the ground and a South Dakota-based lender filed a $27 million foreclosure suit on the property in late 2008. An affiliate of Plano, Texas-based Beal Bank bought the property’s loan from the lender, Bank First, and took possession of the site, which sits just west of the Edens Expressway, through a sheriff’s sale in July 2011.
A month earlier, Mr. Renko and his partners were indicted by a federal grand jury on loan fraud charges. That case is pending.
A Beal Bank spokesman declined to comment.
Distressed investors have been able to pick up failed developments on the cheap in the past couple years, but it remains difficult to find financing to start new projects in all but the best locations.
Apartments are one exception, with strong occupancy and rent gains allowing a growing number of developers to start new projects after a long drought. Nine suburban projects totaling 1,620 units are under construction, with more on the way, according to Appraisal Research Counselors, a Chicago-based consulting firm.
“We think there’s a lot of pent-up demand in the affluent areas of Chicago for luxury rental housing,” Mr. Strossberg said. “There’s been virtually no new construction in these markets, and there are a lot of folks out there who don’t want to be a condominium owner and don’t want to stay in their single-family homes, so this offers them an alternative.”
Net rents at North Shore apartment buildings have risen 12.8 percent over the past year, the biggest gain among all suburban submarkets, according to Appraisal Research. Excluding Evanston, other proposed developments in the northern suburbs include a 290-unit complex in Glenview and projects in Vernon Hills and Wheeling.
“I think a couple of projects up there could do well,” said Appraisal Research Vice-President Ron DeVries. “If they all get funded that would certainly be a concern, but there hasn’t been that much product built in that submarket.”
Morningside has been busy in the past year, breaking ground last month on a 306-unit apartment development in Wheaton and completing a failed 60-unit condo project in Des Plaines as a rental building. The firm also completed a 252-unit development in Highwood last year.
Crossroads also has been an active buyer of distressed property, acquiring a Rosemont office building for $10.8 million in May, about half its price five years earlier.
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