A legal battle over a $17 per-square-foot Loop office sale gives an inside look at how buying at the bottom of Chicago’s post-pandemic market is easier said than done.
When Igor Gabal bought 300 West Adams for just $4 million late last year, investors Chris Hansen and John Thomas sued, claiming Gabal secretly cut them out of the deal.
The case was dismissed last week after Cook County Circuit Court Judge Caroline Kato Moreland ruled in favor of Gabal, yet tensions remain high and at least one plaintiff isn’t backing down.
Outside of court, members of each side claim that the other is unqualified to run the 12-story, 240,000-square-foot building.
“They have no wherewithal to execute and are just trying to disturb the normal people who are willing and have the capability to do this,” Gabal said of Thomas and Hansen.
Thomas said the lawsuit was decided on technicalities and that Gabal doesn’t have the level of experience necessary to turn around the distressed asset.
But Thomas’ experience in the industry has been punctuated by misconduct, including a stint in prison for business-related crimes, and a 2022 bankruptcy.
He said he plans to amend the original complaint and petition the judge to reconsider the case.
“We are going to continue to pursue this,” Thomas said.
Hansen could not be reached for comment. An attorney representing him and Thomas did not respond to requests for comment.
Financing fumble
The legal saga ties back to an agreement made for Gabal to enter the auction for 300 West Adams on behalf of an entity controlled by himself, Thomas and Hansen. (Gabal and Thomas each had 45 percent stakes and Hansen had 10 percent).
Gabal won by placing a bid for $7.5 million, but failed to secure the financing necessary to support the purchase, legal filings show.
Later, Gabal separately secured financing to buy the building himself for $4 million, and the sellers agreed to that price.
Hansen and Thomas’ attorney claimed they should have been included in Gabal’s second offer to buy the building, but an attorney for Gabal argued he was under no such obligation. Gabal’s motion to dismiss added that Hansen and Thomas had not proven that they had the financial ability to buy the building without him.
The lawsuit was dismissed on various legal grounds including that some of the claims were improperly pleaded. JLL was also named in the lawsuit for the commercial brokerage’s role in facilitating the final sale, but that claim was dismissed as well.
Despite the dismissal, Thomas said he has doubts about Gabal as well as Gabal’s supposed business partner in the purchase, Ruben Espinoza. Espinoza is facing legal issues of his own, stemming from money he allegedly owes to tenants, a receiver and a lender in amounts ranging from $300,000 to $3 million.
Espinoza’s involvement, if any, with 300 West Adams is unclear. The building is listed as part of Espinoza’s portfolio on his website, but his name does not appear on publicly filed property records. His name also does not appear in Thomas and Hansens’ lawsuit.
Espinoza did not respond to requests for comment, and Gabal declined to comment on whether Espinoza is involved with the property.
The path ahead
Moving forward, Gabal said he is focused on leasing up the building and potentially converting the first two floors to a data center.
The building is well positioned for that use because of potential access to the nearby CenTrio cooling system and a fiber route that runs along Franklin Street, he said.
Although he snagged 300 West Adams for a historic bargain, turning a profit on it is no simple task.
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At the time of the sale, the office building was 50 percent occupied and struggling to stay afloat in the wake of remote-work trends. Its low sale price is also attributed to the fact that the building is subject to a 99-year ground lease, controlled by underlying land owner Alliance HP.
Alliance HP bought the land and the building for $51 million in 2012 and bifurcated the property that same year. The ground lease started at $1 million a year and increases by 3 percent each year until 2042, after which it plateaus to $2.5 million for the remainder of the lease.
Editor’s note: this post has been updated to correct details about Thomas’ prison sentence.