Developers Sue Ex-Partners in Chicago Office Conversion

Chicago affordable housing builders Celadon Partners and Blackwood Group sued fellow developer Gabriel Martinez, alleging he cut them out of one of the Loop’s high-profile office-to-residential conversions backed by subsidies from the city.

Celadon, led by Scott Henry and Aron Weisner, and contractor Blackwood, led by Jose Duarte and Rafael Hernandez, filed suit in Cook County court last week accusing Martinez and his firm Primera Group of sidestepping them by handing off the planned $184 million redevelopment of the 41-story Clark Adams Building to investor Marc Calabria.

The project is backed by a $68 million subsidy awarded by the city in exchange for reserving at least 30 percent of the 400 units for households making less than the area median income. But Celadon and Blackwood claim they did all the work to win the subsidy yet no longer stand to benefit from the project due to Martinez’s alleged dishonesty.

Celadon and Blackwood claim they lost more than $15 million in potential fees and development upside, accusing Martinez and his partners of breach of contract, fraud and tortious interference. They argue the defendants used their confidential financials, design plans and city contacts to push through a near-identical project, and they’re asking for an award of at least $15 million.

Bloomingdale-based Calabria saved the project by infusing cash into the deal for the property, at 105 West Adams Street. But Martinez only had to bring Calabria on as an investor, and ditch Celadon and Blackwood, because Martinez misled them into believing he could close on buying the building out of financial distress for $11 million, the lawsuit said.

Old National Bank listed the building’s loan for sale after its previous owner, Musa Tadros, defaulted on a $29 million mortgage tied to the portion of the building Primera’s venture now owns. The loan sale to Primera gave it control of the 11th through 40th floors of the Clark Adams property, which is the portion slated for the residential conversion into about 400 units, an updated plan from Celadon’s original vision.

It was Celadon and Blackwood who were named finalists in the city’s LaSalle Street Reimagined initiative, pitching a plan to turn the mostly vacant office tower into 247 apartments — 75 percent of them affordable — plus ground-floor retail and a neighborhood grocer.

Lacking immediate financing to acquire the building from Old National, the developers say they brought in Martinez as a short-term partner. He signed a non-circumvention agreement and pledged to buy the property for $11 million, hold it until city approvals came through, then resell to the plaintiffs for $20 million.

But the lawsuit alleges Martinez never had the money, strung his partners along with false promises of imminent funding, then turned around and offered the deal to Calabria, an accountant. Calabria formed 105 Adams Development LLC, which ultimately bought the building in 2024 for nearly $10 million, using an $8.3 million mortgage from Millennium Bank to fund the transaction. Celadon and Blackwood also sued the LLC, which is tied to Calabria, the suit shows.

Primera didn’t return a request for comment.

The new venture, with Martinez as a minority stakeholder, has since advanced its own proposal with the city — one that slashes affordable units to LaSalle Street Reimagined’s minimum requirement of 30 percent of total units. But they increased the total number of units to 400 by making them smaller floorplans, according to the suit and previous reports. Calabria and Primera’s proposal, in addition to the city subsidy, would be funded by over $15 million in developer equity, $77 million in debt from Millennium Bank and almost $24 million from the sale of historic tax credits.

Beyond the immediate dispute, the case spotlights the high stakes and political sensitivities around LaSalle Street Reimagined, which was first brought forth by former Mayor Lori Lightfoot to revive Loop office buildings as housing or other uses. After Brandon Johnson’s election, the city has continued the program to funnel subsidies toward turning outdated office towers into apartments.

Five other proposals have moved forward under Johnson, totaling more than 1,400 residential units — including 430 affordable units. If all goes according to plan, the five projects would receive $249 million in city tax increment financing funds to subsidize the cost of the projects, according to reports earlier this year. The buildings with conversions in the works are at 79 West Monroe Street, where developer Campari Group and Chicago-based partner R2 were first of the batch to break ground in March; along with 135 South LaSalle Street, 111 West Monroe Street, 208 South LaSalle and 30 North LaSalle.

The initiative has been billed as a cornerstone of downtown revival, but critics warn it risks producing more market-rate units than affordable ones. If Celadon prevails, the case could reverberate through City Hall by forcing greater scrutiny on how subsidies are awarded and how developers structure partnerships to lock down site control before city approvals and tax-exempt financing are secured.