Local investors pay $17 million for failed West Loop condo project

June 11, 2013, By David Lee Matthews Crain’s Chicago Business – Two Chicago real estate investment firms paid about $16.8 million for most of a failed West Loop condominium tower at the center of an alleged Ponzi scheme.

A joint venture between Randolph Street Realty Capital LLC and Origin Capital Partners closed last week on 66 unsold condos and commercial space at Pure, a 12-story glass and concrete tower at 24 S. Morgan St. The venture plans to spend another $1.3 million renovating the development and rebranding it as a luxury rental building called Lux24, according to Randolph Principal Jonathan Saliterman.

The sale closes a difficult chapter for Pure, which was repossessed by its lender in 2008. The project’s developer, Sunrise Equities Inc., which only sold four units, entered bankruptcy that year and its co-owners were later indicted on charges alleging they defrauded investors and lenders of more than $40 million.

One of the developers, Amjed Mahmood, was sentenced to five years in federal prison last year, while the other two are believed to have fled the country.

The acquisition is the fourth for the Randolph-Origin venture, which paid $8 million late last year for a bank-owned mixed-use building in Naperville. Earlier this year, Randolph sold a 58-unit condo-turned-apartment building nearby to developer Steven Fifield at a hefty profit, and Mr. Saliterman aims for similar results at Pure. The venture also bought out three of the four Pure condo owners in separate transactions.

“We know the submarket very well, we did very well on the deal down the street and we think this is better real estate,” Mr. Saliterman said.

David Welk, Origin’s director of acquisitions, said the venture plans to build an additional seven units out of unfinished space. Apartments at the building are expected to rent for about $2.30 per square foot, he said.

“This is an asset we’ve long watched with interest and we wanted to be part of the West Loop and the energy that’s going on there,” Mr. Welk said.

Downtown apartment occupancies are high and rents are at all-time highs, though a building boom forecast to add more than 5,200 units to the market by 2015 will increase competition for tenants.

The Randolph-Origin venture acquired Pure from United Central Bank of Texas, a Garland, Texas-based lender that in 2009 acquired the assets of Mutual Bank of Harvey, which provided Sunrise with a $20 million construction loan to finance the project. A United Central executive did not respond to requests for comment.

Pure, one of the last failed sizeable condo projects left to sell in Chicago, garnered international interest and 34 offers, said George Toscas of ACO Commercial, which brokered the sale.

One of the bidders was Don Alexander of Gamla Cedron Group, which paid about $11 million last year for 39 unsold condos in a River North tower. Aventura, Fla.-based Gamla and other investors kept busy during the recession scooping up failed condo projects at a discount, but such opportunities are getting scarcer and more competitive in Chicago, he said.

“I wish I could find another one,” Mr. Alexander said. “When you have 30 some-odd bidders and 80 tours it changes the ballgame a lot.”