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.
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
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.