Editor's Update: This case was voluntarily dismissed without prejudice on Sept. 21, 2016.

A development firm, which plans to build a proposed 18-story River North restaurant and hotel, has sued its potential project partners for potentially more than $2 million, alleging the others schemed to fool PG into building the hotel and walking away. 

Rendering of 18-story hotel and restaurant project proposed for LaSalle and Hubbard in River North.
Rendering of 18-story hotel and restaurant project proposed for LaSalle and Hubbard in River North.

In June, 42nd Ward Alderman Brendan Reilly and the River North Residents Association hosted a community meeting at which developer PG Development presented plans for the 18-story, 224-foot tall building at 430 N. LaSalle St. and 142 W. Hubbard St., near the Merchandise Mart CTA station. The ground floor would include a 6,000-square-foot restaurant, topped by a new hotel with 199 rooms. 

However, on Sept. 13, PG brought a lawsuit in Cook County Circuit Court against the others with which it intended to partner to build on that property, alleging fraud. 

Hubbard LaSalle signed a ground lease for the property on Dec. 1, 2014. PG, which filed the complaint, named Hubbard LaSalle as a defendant, as well as its manager and owner, Jaime J. Javors, and Newmark Midwest Region, a Chicago-based licensed real estate brokerage firm, and Matthew Ward, of Orland Park, a licensed real estate broker and senior managing director of Newmark. 

According to the complaint, Ward and Newmark approached PG about the property in 2015, intiating negotiations with Javors to purchase the property for development. During the course of those meetings, “Javors and Ward advised PG that a sale of the property could not happen” since the trust that owned it wasn’t allowed to sell. They did tell PG it could sublease the property from Hubbard. 

Basing its decision on information Ward provided, PG said it negotiated sublease terms for the duration of Hubbard’s master lease, which ends Dec. 31, 2018. PG purportedly agreed to terms on Oct. 21, 2015. During the bargaining, PG alleged it requested a copy of the master lease, but “after much negotiation, Javors and Hubbard provided to PG a redacted copy.” 

Ward and Javors, the complaint continued, assured PG the redacted information concerned only financial terms the trust required be kept confidential. However, PG argued, “there were no restrictions on the trust selling the property since a redacted portion of the master lease granted Hubbard a right of first refusal in the event the trust elected to sell the property during the term of the master lease.” 

PG said it was very clear about its plans to build a hotel, but assign its interest to a major chain. However, PG alleged Ward continually referred to the market rental rate “all while knowing that no hotel chain would accept an assignment of a sublease of a hotel property in the Chicago market” absent the option to purchase. 

The sublease agreement carried a due diligence period set to expire Dec. 1. But on Dec. 9, Hubbard and the trust allegedly signed an amended agreement extending the deadline and allowing PG to terminate its obligations for $600,000. As part of the amendment, PG also got access to an intact copy of the master lease, revealing the truth it says was fraudulently obscured during negotiations. PG also said this information proved Ward and Javors “substantially overstated” market rental rates. 

Although it places its damages at more than $2 million, PG said “money damages will not compensate” for the fraud since getting PG to cancel the sublease “was part of the scheme.” Rather, PG argued, the sublease should be reformed with a monthly rent figure “commensurate with that set forth in the master lease.” 

Representing PG in this matter are attorneys from the Chicago firm of Cohon Raizes & Regal.

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