Latsko sues developer Nick Anderson over River North retail sewage backup

Chicago landlord Fred Latsko claims developer Nick Anderson is an uncooperative neighbor in a lawsuit working its way through Cook County court.

A venture led by Latsko is suing its condo association in River North, which is led by Anderson, for failing to maintain the building at 360 North State and 9 West Kinzie streets, after repeated sewage back-ups caused closures of high-end steakhouse STK Chicago.

The building contains separately owned commercial condos, and Latsko alleges that his unit, which is rented to STK, is facing an unfair share of the property’s maintenance costs due mismanagement by the condo association. Anderson, a former Related Midwest executive whose firm Fern Hill is planning to build a 44-story, 500-unit Old Town housing complex, holds a majority of the units in the building and thus controls the condo association.

Latsko’s venture claims Fern Hill has failed to pay for necessary repairs and adhere to other obligations, like holding regular open condo board meetings and providing itemized accounting upon request. 

Latsko’s complaint was filed in October against the Kinzie State Commercial Condominium Association and its board, which oversees the four-story building. The board claims it fulfilled its duty to inspect the building’s plumbing after flash floods in 2020 and 2021 and denies it has any ongoing financial responsibility in the matter.

Attorneys for Latsko’s company, River North Partners Holdings LLC, have struggled to serve court papers to the condo association and its board, of which Anderson is president. Latsko’s lawyers have sought the court’s permission to pursue more aggressive tactics to serve Anderson, including the use of a private detective agency.

The complaint alleges that the board hasn’t met its obligations to repair a sewer line to prevent flooding and maintain other shared facilities like the building’s freight elevator, and asks a judge to compel it to do so under the Illinois Condominium Property Act.

Floods in 2020 and 2021 ultimately led the condo association to take out an insurance claim of $19,000, which Latsko’s company alleges was not used to assist with “extensive flooding” of its restaurant on the building’s first floor. The issue went unresolved as did problems with the building’s freight elevator, according to court filings.

The condo association claimed that it sought bids to fix the elevator and contracted a plumber to inspect the building’s drainage systems and has since determined that the flooding is due to the city’s storm drain.

Attorneys for Latsko’s River North Partners Holdings and Kinzie State Commercial Condominium Association didn’t return requests for comment.

The building has been majority owned by Anderson’s firm, Fern Hill, since May of last year when it purchased the remainder of the property and bought out another occupant – the Museum of Broadcast Communications, according to the Chicago Tribune.

The second floor and a portion of the basement was still owned by the Museum of Broadcast Communications when the flooding began back in June of 2020, with Fern Hill owning the other three units in the building. All of these units were vacant, with Latsko’s company owning the only occupied space on the first floor as well as another portion of the basement used for storage, according to court filings.

In June 2020, a heavy rainfall caused a back-up of “raw sewage” into the building, impacting the first floor, basement and other common areas of the building, according to the court documents. This happened again the following summer.

After the June 2021 flood caused more extensive damage to STK Chicago, attorneys for Latsko’s company claimed it began urging the condo board to take preventative action to avoid another flood. Five days later, there was another sewage back-up.

Latsko’s company — which also owns high-end Gold Coast retail and North Side apartments, among other Chicago real estate — then decided to take matters into its own hands, doing some limited repair work and asking the city to come out to check and clean the sewer line, according to the complaint. Still, the back-ups continued causing more closures of the restaurant.

The lawsuit also alleged the condo association neglected other responsibilities such as holding regular board meetings, paying association expenses, passing a budget and supplemental budgets to deal with larger repairs and providing itemized accounting upon request.

In the spring last year, the board notified condo owners that the building has “an immediate need” for over $44,000 to fulfill unpaid invoices, according to the complaint. Latsko’s company claimed it helped pitch in to cover this cost and has always paid its assessments on time, but similar debts popped up throughout the summer of last year.

In August and September of 2023, the two parties’ attorneys exchanged letters, with Latsko’s company demanding the board take “immediate action” to install a backflow preventer, which it quoted would cost about $15,000, and fix the freight elevator — an estimated cost of about $10,000. The board denied the request, saying that the backflow preventer was an expense of “over $100,000” that would only benefit STK Chicago’s unit and that the problem was with the city’s storm drain, not the building, according to copies of the letters filed with the court.

The board dismissed claims that it had violated its obligation to pass a new budget because Anderson’s firm was in the middle of purchasing the Museum of Broadcast Communications’ condo unit, which it said would “naturally resolve any outstanding association budgetary issues,” according to one of its letters. 

This all came to a head in an Oct. 3 board meeting demanded by Latsko’s company, which it said was the first open board meeting held all year. During the meeting, the board allegedly agreed to a roughly $10,000 project to determine the condition of the property’s sanitation line, funded by STK Chicago, but later reversed this decision, in meeting minutes provided to Latsko’s company upon request, according to the complaint.

It was at this point that Latsko’s company filed its lawsuit, on Oct. 27, which alleges that the condo association breached its fiduciary duty and its contract with condo owners and violated the ICPA.

The Museum of Broadcast Communications no longer occupies the building, after it moved out last year. In 2019, the museum sold its third and fourth floors to Anderson’s Fern Hill for $2.1 million and $2.2 million, respectively, and was progressing toward selling an additional unit in the building to Fern Hill as it was exiting the property last year. The museum and Fern Hill closed that sale in October for a little less than $1.1 million, according to Cook County records.

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