A New Jersey lender whose clients made big bets on rundown buildings in Chicago’s South Side is heading to court as its collateral slips into distress.
Affiliates of Accolend are foreclosing on three apartment properties owned by Brooklyn-based investor Sholem Oberlander.
The lender is pursuing Oberlander’s failure to pay principal and interest on $2.6 million in loans backing 43 units, at 400 East 79th Street and 7854 South Ellis Avenue, in the Grand Crossing neighborhood, and 8200 South Cottage Grove Avenue, just to the south in the Chatham area.
The buildings are the latest pieces of the mysterious landlord’s Chicago portfolio to draw lawsuits from lenders and city officials. Oberlander was a smaller player in the South Side submarket, but he’s worth watching because the risk he took was extreme. And his deals made no sense.
He bought properties at higher values even though the buildings, mostly apartments, were already facing building code violation lawsuits brought by the city of Chicago. Building records show minimal, if any, repairs and renovations.
The foreclosure lawsuits filed earlier this month mean essentially his entire known nine-building, 157-unit Chicago portfolio is in distress. Many of those properties have been auctioned or in the process of being auctioned off, public records show. Separately, Oberlander is facing upwards of $7,800 in fines from the city at 7951 South Muskegon Avenue after being charged with failing to remedy building code violations that threatened the safety of occupants, records show.
Oberlander bought all of the buildings between 2021 and 2022 from two other investors who have also run into trouble, either with their tenants’ concerns with building quality or their lenders, and with a similar pattern of bizarre purchases.
Oberlander bought eight properties from Yehuda Reich’s BSD Realty in 2021 for more than $11.3 million, or $72,000 per unit, public records show. Another was purchased in 2022 from fellow Brooklyn investor Izzy Rotenberg, in which Oberlander paid $1.1 million, more than three times the price Rottenberg paid in 2019.
Their deals follow a pattern of out-of-state landlords who paid perpetually higher prices for low-grade property in Chicago. Some of these landlords have been revealed to be at the center of an investigation by Fannie Mae and other government agencies. That probe involves at least $100 million in Fannie Mae-backed debt in the region and $700 million across the nation.
Accolend’s acolytes
Oberlander’s acquisition strategy made little sense, but his lender’s decisions were arguably more perplexing.
Accolend is led by Boris Grinberg, who started the Teaneck, New Jersey-based firm in 2016. It became a go-to lender for New York and Lakewood, New Jersey-based investors including Oberlander, Mark Nussbaum and Eli Sieger, for Chicago buildings requiring extensive renovations. Considering the repairs required, the acquisition prices paid by these East Coast buyers made local investors balk.
After originating the Chicago real estate loans in 2021 and 2022, Accolend sold many of the debts — including those for Oberlander’s buildings — to Iowa-based insurance and annuities firm Athene, a unit of private equity giant Apollo Global Management. Athene’s takeover of Accolend’s loans came during a big push by private equity into credit businesses amid a pullback by banks, especially on commercial property lending.
But real estate players that borrowed from Accolend for Chicago deals have since faced serious financial problems. Nussbaum and Sieger have run into severe legal headaches related to their Chicago real estate dealings, with Nussbaum under criminal indictment in New York and Sieger’s property facing foreclosure in Chicago.
Oberlander and these other players quickly built up large portfolios in recent years only to face a litany of building code violations, civil lawsuits and other problems with their investments shortly after.
Oberlander declined to comment. Accolend, which still services the Oberlander loans purchased by Athene, didn’t return requests for comment.
The landlord’s allegedly delinquent Athene loans join a portfolio of at least five other properties that have already been seized by their lenders at foreclosure or are on track to be. Oberlander borrowed nearly $6 million from a different lender, New York-based Roc Capital, to buy those properties.
At the 29-unit 9101 South Ashland Avenue, the only Chicago building Oberlander has publicly sold without a lender filing to foreclose, he was in a similar situation to his other properties due to building code violations probed by the city, records show. Oberlander bought the building from Reich for $2.4 million only to have the city order it vacated months later due to life safety issues stemming from building conditions.
Oberlander later obtained a mortgage for more than $1.8 million from a Pennsylvania-based lender that appeared to be for funding a rehab of the property. But Oberlander sold the building last year for just $450,000 to an LLC controlled by Chicago-based Rodolphe Nivose. The lender, NextRes, released Oberlander’s firm from its mortgage when Nivose bought the property, however, meaning the rehab work may not have begun to get funded before the sale.
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