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Financial:http://www.chicagobusiness.com/realestate/20110513/CRED03/110519916/investor-agrees-to-buy-portfolio-in-chapter-7-case

Investor Agrees to buy Portfolio in Chapter 7 Case

(Crain’s) — An Indiana investor has agreed to buy a portfolio of 125 loans and residential properties in the Chicago area, a key step in the liquidation of failed investment firm Smith Rothchild Financial Co.

REL Financial LLC, a Munster, Ind.-based venture led by investor Sergio Garcia II, agreed to buy the loans and properties, just a fraction of the $4.9 million owed to Smith Rothchild’s secured creditors, U.S. Bankruptcy Court records show.

The portfolio consists of distressed single-family homes and apartments and loans secured by them, mostly on the South and West sides of Chicago and in Gary, Ind. REL agreed to pay for the properties and for the notes, court documents show. A judge still has to approve the transaction.

Chicago-based Smith Rothchild, which provided short-term financing to investors that rehab properties, filed for Chapter 7 bankruptcy liquidation last May in U.S. Bankruptcy Court in Chicago. Essex Realty Group Inc., a Chicago-based brokerage, was hired in March to market the portfolio.

Related story: Portfolio of residential properties for sale in firm’s Chapter 7

The price for the portfolio, Smith Rothchild’s primary asset, means the firm’s secured creditors will receive pennies on the dollar in the liquidation.

New York-based CIT Group Inc. is Smith Rothchild’s largest secured creditor, with a claim of $2.9 million. Cole Taylor Bank, a subsidiary of Rosemont-based Taylor Capital Group Inc., is the second-largest creditor, with a $1.8-million claim, according to a court document.

A spokesman with Cole Taylor declines to comment, and a CIT representative did not return a phone call.