Cole Taylor files foreclosure suit over Uptown development

By Samantha Sleevi - Oct. 21, 2008

(Crain’s) — Cole Taylor Bank has filed a $15.5 million foreclosure lawsuit on an Uptown development site, where missing developer Salman Ibrahim once proposed an 18-story condominium building.

A venture controlled by Mr. Ibrahim, CEO of Chicago-based Sunrise Equities Inc., purchased the 1.3-acre site at 4700 N. Clarendon Ave. in June 2007 with financing from Cole Taylor that was structured to comply with the Islamic prohibition against the payment of interest.

But the Pakistani-born developer disappeared in August, leaving investors with losses that could total $50 million, according to published reports. Mr. Ibrahim has abandoned the project and has either fled the country or is trying to, according to Cole Taylor’s complaint, which was filed in Cook County Circuit Court on October 6.

The securities department of the Illinois Secretary of State has opened up an investigation into the business affairs of Mr. Ibrahim, who often attracted Islamic investors to his projects.

The telephone number for Sunrise Equities Inc. listed on its website, is disconnected.

Chicago attorney Alan S. Levin, who represented Mr. Ibrahim on the Uptown project and on other matters, did not return a call requesting comment.

Cole Taylor filed its foreclosure case on Oct. 6, about a week after Dublin, Ireland-based Castleroc Estates Ltd. filed suit to recover $250,000 in earnest money that a group of Irish speculators put down to buy 16 units in the 162-unit project.

Irish firm sues to recover deposits on Uptown project

To finance the purchase of the Uptown site, Cole Taylor used a technique called Murabaha, under which a bank buys a property for a bank customer and re-sells it to the customer at a profit. The profit is calculated based on the interest the bank would ordinarily have charged. But the customer typically makes installment payments over a longer period of time.

Cole Taylor purchased the site from a third party in June 2007 and agreed to sell it to a venture controlled by Mr. Ibrahim in July 2009 for $7.2 million, plus a profit of $8.64 million, according to the complaint. Until the sale completed, Mr. Ibrahim was supposed to make monthly installment payments, the complaint says.

Mr. Ibrahim is named as a defendant in the foreclosure case because he personally guaranteed the agreement, the complaint alleges.Mr. Ibrahim’s business practices came under scrutiny after a group of investors filed a petition in U.S. Bankruptcy Court in Chicago on September 15, seeking to force Sunrise into bankruptcy.