Portal Innovations Sues Beacon Capital Partners

Fred Seigel’s commercial real estate firm Beacon Capital Partners is accused of abandoning its commitment to fund a series of biotech incubators, jeopardizing leases in Chicago’s Fulton Market and elsewhere across the country.

Chicago-based incubator firm Portal Innovations filed a lawsuit against Boston-based Beacon, its joint venture partner, last month, alleging the firm failed to follow through on agreements to fund the startup’s operations in four U.S. cities, including Chicago. Beacon owns significant Chicago office properties, including one in the midst of a $370 million foreclosure dispute, and recently took a loss on a LaSalle Street office sale in the Loop.

Portal’s litigation underscores fears that life sciences investments became over-saturated during and just after the pandemic.

Portal currently occupies a 53,000-square-foot workspace in Trammell Crow’s lab office building at 400 North Aberdeen Street in Fulton Market. Portal is also a partner at the University of Chicago Polsky Center’s life sciences incubator at Hyde Park Labs, a 13-story commercial building at 5207 South Harper Avenue developed by Beacon and Trammell.

Beacon, along with its key financial backer, California Teachers Retirement System, had an agreement to fund Portal’s “launchpads” in Chicago, Atlanta, Houston and Boston so that Portal could use its “expertise” at helping early stage startups with their real estate, equipment and capital requirements, the lawsuit says. The retirement fund owned 98 percent of the Beacon entities’ stakes in the Portal projects at issue, according to the litigation.

But at some point in 2024, Beacon and the California teachers “lost interest” in life sciences and began refusing to fund capital calls as agreed upon between the investors and Portal, the suit claims.

Since the dispute began, Portal’s locations across the U.S. have struggled to keep up with bills, including lease payments, the lawsuit alleges. In some locations, including Boston and Houston, Portal launchpads are at risk of shutting down imminently, the filing claims.

Much of Portal’s lawsuit against Beacon is redacted, but it states Beacon refused to fund capital calls unless Portal “reworked its contractual obligations.” The suit doesn’t specify Beacon’s demands within the un-redacted portions of the lawsuit, but Portal claims Beacon is trying to remove Portal as manager of their joint ventures. Beacon’s refusal throughout 2025 to further fund Portal has caused their joint ventures to lose out on adding prospective members to their rosters at their various lab leases, Portal’s suit claims.

“The larger impact is the reputational damage in the life science market, as [Beacon’s] actions have made it appear that [Portal] and the joint venture companies are untrustworthy partners that back out of deals at the last minute,” Portal said in its suit.

Representatives of Portal and Beacon didn’t respond to requests for comment.

Beacon filed a motion to dismiss the lawsuit late last month, revealing more details about the fight — and claiming Portal’s financial performance has been “dismal,” with losses of over $50 million posted by their joint ventures.

Over the past few years, life science offices have seen a decrease in interest from the commercial real estate sector amid fears they were overbuilt during the pandemic when traditional office demand imploded. As the general office market continues to recover, investors are less keen to replace their hopes with life sciences.

In 2024, Chicago-based Fulton Street Companies pivoted from developing a life sciences project to building a two-tower complex with over 1,000 housing units at 1200 West Fulton Street. Furthermore, investors in developer Sterling Bay’s 285,000-square-foot life sciences building next to the failed Lincoln Yards megaproject parcels are poised to take a loss. The property remains vacant and is set to be sold in a bid to cover construction debt funded by Bank OZK. Plus, a separate $265 million Bank OZK loan note backing another vacant life sciences property that Sterling built in San Diego was offloaded this week by the lender to another buyer.

In Cook County Court in Illinois, Beacon’s motion to dismiss claims Portal’s only capital calls at issue were two rounds totaling just $900,000. Beacon also alleges that it and its partners have invested over $52 million in the Portal joint ventures, plus over $42 million in tenant improvement costs to help build out their workspaces.

Beacon argues it had no obligation to fund the recent capital calls because Portal failed to secure approval for a 2025 annual budget, a contractual prerequisite for demanding cash. Beacon further alleges the entities have lost about $50.5 million to date, while significantly missing revenue projections.

The filing accuses Portal of “misconduct,” claiming the incubator firm improperly used joint venture funds to pay itself excessive management fees and cover costs for unrelated businesses. Beacon asserts it exercised its right to remove Portal as the manager of the joint ventures last month — a few days before Portal filed its lawsuit — due to these alleged breaches of fiduciary duty.

Beacon further denies that the leases are in immediate jeopardy, stating the joint ventures currently hold about $2.5 million in cash on hand. Regarding the Fulton Market site specifically, Beacon argues it has already met its $15 million contribution cap and has no obligation to provide more funding.

A hearing on each of the litigants’ various motions is set for 10 a.m. Monday in courtroom 2408 at the Richard J. Daley Center in Chicago, online records show.