Dan Churney Nov. 28, 2015, 12:19am

A development group with plans to convert a vintage Loop building into a hotel, is suing the sellers, alleging they tried to pull a fast one by misleading them about the structure’s square footage and zoning status.

On Nov. 20 in Cook County Circuit Court, Texas-based Adam David 1 LLC lodged suits against 55 E. Washington Development LLC and Pittsfield Development, Pittsfield Hotel Holdings and Pittsfield Residential II.

Adam David alleged defendants committed fraud, fraudulent inducement and negligent misrepresentation, as well as violations of the Illinois Consumer Fraud and Deceptive Business Practices Act. Adam also alleged the Pittsfield corporations engaged in unjust enrichment.

55 E. Washington Development owns Fornelli Tower, a residential section of the 88-year-old, 38-story Pittsfield Building at 55 E. Washington St., on Jewelers Row. The Pittsfield corporations own an adjacent part of the Pittsfield building.

In July, Adam started looking into the purchase of Fornelli Tower after reviewing documents the owners disseminated among the Chicago real estate community, which provided data about the tower, including that there was 131,880-square-feet of rentable space in the tower. Representatives of Adam toured the tower and decided to buy the tower for $55 million and redevelop it.

However by autumn, Adam grew suspicious of the square footage figure it had been given and had a professional surveyor measure the tower by laser. Adam said the result showed the number given by the defendants was “grossly incorrect.” Specifically, the surveyor came up with 115,331-square feet, a difference of 16,459-square feet, or 13 percent less than Adam had been led to believe.

This alleged misrepresentation made it impossible for Adam to secure financing and adequately appraise the tower within the time frame laid out by the purchase contract, because Adam had to redo its financial models, underwriting assumptions and the package it was drawing up for potential investors. Adam further claimed it incurred additional costs and the project sustained a “devaluation.”

As Adam was preparing to buy the tower, it was also taking steps to buy the part of the Pittsfield building that was next door for $36 million, putting down $500,000 in earnest money. However, this undertaking also ran aground. The Pittsfield owners allegedly told Adam the Pittsfield could readily be turned into a hotel and city zoning permits for such a conversion were in hand.

According to Adam, though, Alderman Brendan Reilly, in whose ward the property lies, set them straight. During a meeting with Reilly to discuss the project, Reilly said no permits had been issued or were about to be issued. In fact, Reilly said he would oppose rezoning, and at any rate, the process to obtain permits would be very lengthy.

Adam said it tried to settle these problems with the owners of Fornelli Tower and the Pittsfield, but to no avail.

“Despite multiple attempts by Purchaser to amicably resolve this matter, the parties have been unable to do so. This lawsuit followed,” Adam said.

Adam wants at least $1 million in damages each from 55 E. Washington Development and the three Pittsfield corporations. Adam also wants the court to order all defendants to hold up their ends of the purchase contract, and to impose a closing date on the contract of 180 days from the date of the court order.

The Chicago firm of Daspin & Aument is representing Adam, with Judge David B. Atkins assigned to preside over the case. No attorney has yet filed an appearance for any of the defendants. A case management conference is set for March 21.

Some of the defendants have had their own differences. 55 E. Washington Development has taken Pittsfield Development to court on at least two occasions – once, in 2011 regarding a contract and again in 2014 seeking an injunction.

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Organizations in this Story

Daspin and Aument, LLP
227 W Monroe St
Chicago, IL 60606

Cook County Circuit Court
50 W Washington St
Chicago, IL 60602

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