River North office landlord Jaime “Jay” Javors filed another lawsuit this month to evict affiliates of multifamily developer CA Ventures.
A Javors-controlled entity that owns the 12-story property at 448 North LaSalle Street filed its third eviction complaint this year against tenants tied to Chicago-based CA Ventures, which leased five floors in the 172,000-square-foot building.
Despite striking the lease just ahead of the pandemic, CA Ventures hasn’t moved into the approximately 70,000-square-foot space it planned. WeWork leased the remaining 62,000 square feet in the building and is also facing an eviction lawsuit from Javors as the coworking company aims to restructure in bankruptcy court.
The lawsuit alleges CA Ventures entities owe the landlord $2.1 million. That includes $322,000 in back rent, and another $441,700 in property tax due this year that wasn’t captured by the escrow set aside as part of monthly rental payments because of a large increase in the property’s taxable value.
The surge in property taxes is complicating a three-way negotiation between Javors, CA Ventures and QuadReal Property Group. QuadReal took control of a student housing partnership with CA Ventures earlier this year, after a failed buyout attempt by CA Ventures.
It’s a slow-moving battle between the three parties, said Tom Scott, CEO of CA Ventures.
A QuadReal affiliate sued Javors’ landlord entity in October, claiming that Scott owned a stake in the building — which was completed in 2021 — while he also negotiated the lease on behalf of CA Ventures at above-market rental rates. The suit claims Scott used his authority in the student housing partnership to put QuadReal on the hook to pay for the entire five-floor lease, even though the student housing unit only needed one floor, and other CA Ventures business lines were set to fill the rest of the space.
“This will not be solved quickly,” Scott told The Real Deal.
The main tenant of the building is a CA Student Living entity that is now wholly owned by QuadReal, but CA Ventures entities are tied to the lease, said CA Ventures CIO John Diedrich, who is leading negotiations with QuadReal. CA Ventures is still willing to move into some of the LaSalle Street space, he said.
“We are in active dialogue with both the landlord and Quad,” Diedrich said. “However, it is not simple and will take time to resolve. The eviction suit is landlord leverage, and the other suit is Quad’s attempt at leverage.”
A QuadReal spokesperson said the defendants named in Javors’ latest lawsuit are controlled by CA Ventures and not its student-housing vehicle, and declined further comment. Neither Javors nor an attorney representing the landlord entity returned requests for comment.
The property’s taxable value will increase by 72 percent next year, according to the lawsuit. The taxes due for next year will be $2.9 million, the landlord claims. The lease with the CA Ventures and QuadReal affiliates means the defendants will have to pay 43 percent of that, more than $1.2 million, the lawsuit states.
The landlord claims that $1 million for the upcoming taxes is due now, and the monthly rental structure must be adjusted so that more money is being set aside to cover property taxes.
The landlord paid a little more than $172,000 in property tax last year, after appealing Cook County Assessor Fritz Kaegi’s $34 million valuation in 2021. The Cook County Board of Review took the property’s partial occupancy into account in its decision to lower the assessed value to around $3.4 million. The fact the property was under construction for part of the year could have been a factor.
The review board wasn’t as kind to Javors and his tenants this year. It granted the landlord’s appeal to undercut the assessor’s $54 million valuation, but the break was smaller. The board brought the valuation down to $38.9 million. An attorney who represented the landlord in the appeal didn’t return a request for comment.
Without another successful appeal of the assessment, the landlord and tenants will be obligated next year to cover a tax bill tied to an even bigger valuation, set by Kaegi’s office this year: $58 million.
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