Streeterville condo conversion faces foreclosure
(Crain's) — PrivateBank & Trust Co. has filed to foreclose on a slow-selling condominium conversion project in Streeterville less than two years after refinancing the 219-unit development.
The bank alleges that the developer of the project at 222 E. Pearson St., an entity formed by Ganesan Visvabharathy, missed its February loan payment and failed to pay off the $6.8-million loan balance when it came due in March.
Known as Pearson on the Park, the 28-story tower is the latest major casualty in a downtown condo market struggling with a glut of unsold units and the worst recession since the early 1980s.
222 E. Pearson St. Photo from CoStar Group Inc. |
As with many downtown condo projects, sales at Pearson on the Park have slowed to a crawl in recent months. Buyers have closed on 176 condos, or 80% of the total, and just three units this year, property records show.
Attempts to reach Mr. Visvabharathy, who has a Ph.D. and is better known as Dr. Vish, were unsuccessful. The developer paid $46.6 million for the building in July 2005, when it was an apartment building. He borrowed $52.5 million from Hypo Real Estate Capital Corp. and $7.5 million from American Mortgage Acceptance Corp. to finance the purchase and his plan to convert the apartments to condos.
Those loans came due in August of 2007, and he refinanced the development with a new $17-million loan from PrivateBank. The loan carried interest of the prime rate plus 1%, or 7.25%, whichever is greater, according to a document included with the foreclosure suit, which was filed this month in Cook County Circuit Court.
To secure the loan, Dr. Vish pledged 55 acres of undeveloped land in downstate Mount Vernon and signed a personal guarantee. The loan originally matured last November but was extended to March.
The developer asked for another extension, to March 2010, a request PrivateBank had agreed to consider based on certain conditions, according to a letter the bank's attorney sent Dr. Vish in April. Now, however, the bank just wants its money back.
In recent months, the developer has cut prices in condos at Pearson on the Park by an average of 13%, but it's unclear whether that will be enough to goose sales in the building. Downtown condo converters sold just 17 units in the first quarter, down from 62 in the year-earlier period, according to Appraisal Research Counselors, a Chicago-based consulting firm.
