Bradford Allen Sues CRG Over Broken Chicago Apartment Sale

Some heavyweights of Chicago’s commercial real estate industry are butting heads in court over nearly $2 million tied up in a failed apartments transaction.

Chicago-based Bradford Allen, co-founded by Laurence Elbaum and Jeffrey Bernstein, filed a lawsuit in Cook County court last week against an affiliate of CRG, the real estate development arm of locally headquartered construction and design conglomerate Clayco, after a $38 million deal got canceled.

Bradford Allen insists it should get back $1.9 million it deposited into escrow as it went into contract to buy the 134-unit building that CRG built at the intersection of Milwaukee and Armitage Avenues on the border of the trendy Bucktown and Logan Square neighborhoods.

But CRG so far has stood firm in that it has the right to keep the money, alleging Bradford Allen didn’t live up to its contractual obligations as part of the sale of the property known as A.M. 1980 Residences at 1980 North Milwaukee.

Bradford entered into a contract to buy the property back in November, according to the lawsuit. But it tried to pull out of the deal by claiming that the CRG affiliate that owned the property misrepresented its operating expenses as well as lease terms. The seller’s moves and alleged failures to disclose certain financial matters amount to a breach of its warranties made in the marketing process, Bradford claims.

Even as Bradford was searching for financing to close the deal, and when it ran into issues with the building’s management, it opted to extend the closing date for the deal in early March, the lawsuit shows. But that became a problem, too, because Bradford felt that Chicago’s controversial new Northwest Side Preservation Ordinance that gives tenants the right of first refusal to buy their buildings complicated the deal.

The building is in the program’s pilot zone, so Bradford claimed CRG now had to offer tenants the right of first refusal to buy the building as part of complying with the new rule, which went into effect March 1. Bradford terminated its contract with CRG on March 11, it said.

Bradford alleges CRG’s leases were flawed because “nearly half” failed to show the amounts being charged for utilities or the formula being used to charge tenants. Bradford also claimed it was impossible to tell which units, if any, were set aside for subsidized renters through Chicago’s Affordable Requirements Ordinance, making it impossible to tell if the building was complying with the ordinance. Bradford later learned the building’s unoccupied units were all designated as affordable units, which amounted to a further violation of the city’s affordable housing rule, the suit alleges.

Additionally, CRG allegedly tried to pass on $200,000 in costs to Bradford for contracts for work on the property and contracts for service and maintenance workers, among other costs that the would-be buyer said it shouldn’t have had to shoulder.

Even though Bradford couldn’t close the deal, it alleges the disagreements over the leasing and contract technicalities at the property constituted a seller’s default on the purchase and sale agreement and should require the return of the escrow deposit, which Bradford increased last winter in order to extend the inspection period.

“Failing to evict holdover tenants, pay expenses incurred in the normal course of business, raising employee salaries, failing to engage sufficient staff and not marketing units for rent are not in accordance with Milwaukee & Armitage’s normal maintenance and management practices,” Bradford said in the suit.

CRG declined to comment, and an attorney for Bradford said the firm declined to comment. CRG has yet to file a response in court.

The property is still on the market, and another buyer has signed a letter of intent to purchase, according to Cushman & Wakefield materials. Cushman’s Brad Smith and Jack Maloney are handling the listing. The identity of the new buyer hasn’t yet been disclosed.

CRG developed the building with the help of a construction loan for more than $23 million from Iowa-based Principal Life Insurance, originated in 2017, public records show. CRG retired the construction debt in 2021 with a new $24 million mortgage loan, also from Principal. CRG has signed off on maturity date extensions with the lender twice in the years since, first to buy another year until April 2025, and again a few months ago to push out the due date to April 2026, public records show.

Bradford Allen has been a buyer of multiple classes of big properties in recent years, having struck deals across the nation for offices and hotels along with mixed-use development sites, including in Arlington Heights in Chicago’s northwest suburbs where it’s building a large commercial campus set to reshape a southern corridor within the town.