Failed closing on $190M deal isn’t SPNA’s only problem

Owners of Chicago’s Ontario Place condos were told to leave their keys on their counters when they moved out Wednesday as a $190 million sale to Strategic Properties of North America was set to close in a few hours.

By the afternoon, they were told they wouldn’t be getting paid on time to sell their units to Strategic, a firm with Illinois and New Jersey offices led by Yitzy Klor and Saul Kuperwasser. But now the transaction for the 467-unit property at 10 East Ontario Street may not happen at all after the closing was scuttled for at least the second time since August, as negotiations between the company and lenders hit a wall.

“It’s pitiful. My heart sank when I heard the closing was canceled,” said unit owner Bill Martinez.

Strategic put up non-refundable money to extend the closing date once, and could lose out on as much as $1.2 million if the condo owners terminate the deal, according to Myron Robinson, who owns property in Ontario. And Strategic may be on the hook to pay out hundreds of thousands, if not millions, of dollars more to investors who allege they were shortchanged by the company, depending on the outcome of one of the multiple lawsuits it’s facing in Illinois.

Strategic Properties is familiar with controversy. Its penchant for big condo deconversions in Chicago have ensured the company is battle-tested, as the deals often invite litigation due to their political nature. Illinois law requires unit owners holding a cumulative 75 percent of a condo building’s value to vote in favor of a bulk sale before a sale can close. The bar in Chicago is set even higher at 85 percent. Owners who are forced to sell unwillingly have tried to sue to stop such deals, but so far haven’t been successful in Illinois courts on purchases by Strategic or any other buyers, attorneys who specialize in condo law have said.

In fact, the sellers at Ontario Place were informed this week that a California federal judge dismissed complaints brought by some unit owners who were opposed to the sale. It was one of several jurisdictions where unit owners had tried to sue Strategic and the property’s condo association in attempts to unwind the deconversion sales, only to be met with rulings that allowed the deal to proceed in all cases.

Yet another lawsuit first filed by investors against Strategic, Klor and Kuperwasser in 2020 and stemming from a $64.5 million multifamily sale in Chicago’s northwest suburbs remains on Cook County’s court docket. And a judge last month declared the investors behind the complaint can inspect financial and business records the condo deconversion players fought to keep secret as they defend an allegation they took $500,000 based on a broken promise.

The suit lays out how a Chicago-area investor named Ari Haas in 2015 formed an entity called Monticello Investments to put $500,000 into a venture Strategic was leading to buy the 496-unit Meadows Apartments property in suburban Lakemoor, based on a promise that Monticello would get 20 percent of the net profits from rental revenue the property generated as well as any eventual sale.

Strategic bought the property for $53 million in 2015 and it was sold for $64.5 million in 2018. The entity Monticello entered was owed $4.5 million out of the 2018 sale’s proceeds, and Monticello would have gotten a 20 percent split of that figure, yet it claims it only received $238,000.

When Haas raised his concerns with Kuperwasser and Klor, they allegedly said he “had already made enough money and he should just move on and go away,” the suit claims. It goes on to assert that another entity controlled by Gail Blumenthal, the former spouse of a late former business partner of Strategic, had just a 4 percent interest in the Lakemoor deal but was paid more than $1 million out of the property sale’s proceeds.

A representative of Strategic Properties declined to comment, as did an attorney defending the firm in the suit. An attorney for Monticello didn’t return a request for comment. In court filings, Strategic has denied any wrongdoing and said the distributions from the sale were made accordingly.

More litigation accusing Strategic of not living up to its word was filed in Cook County court this month, albeit over less money than is at stake for Monticello and the condo owners at Ontario Place. The apartment rental brokerage AptAmigo is suing Strategic over about $8,000 in leasing commissions it says it hasn’t been paid for several deals it’s completed in the last year with renters at 21 East Chestnut Street, the 25-story, 163-unit Gold Coast complex Klor’s firm bought for $44 million 2019.

In the Monticello suit, after Haas’ lawyer alleged Strategic hadn’t complied with a subpoena for the formula used to calculate distributions in the Lakemoor deal and instead provided 42,000 unorganized pages in a document dump, a judge ruled last month that Strategic has to produce four years worth of bank records and that the Blumenthal entity is on the hook to produce records, as well. Both Strategic and Blumenthal had previously objected to that request, but a judge ruled against Strategic’s request to quash it.

A court hearing is set for next month on the matter.

Back in River North, unit owners at Ontario Place are at a standstill and unsure whether they want to proceed with the sale after another delay. A condo board meeting is planned for Friday afternoon, when more decisions could be made on the path forward by the sellers.

“The Buyer’s lender is finalizing underwriting for the Buyer’s loan and requires additional time to complete its review,” attorney Kelly Elmore of the firm KSN, which has been hired by the Ontario Place condo board to assist with the sale, said in an email. “The [condo] association is discussing this matter with the buyer and we expect to have additional information tomorrow afternoon.”

This story has been updated to clarify that KSN is representing only the Ontario condo board in the transaction.