CA Ventures Begins Liquidation Of Its European Arm After Failed Sale Leaves It In A 'Dire Position'
CA Ventures is liquidating its European business after a deal to sell its overseas investment platform to a Bahraini bank fell through following months of negotiations.
The Chicago-based company was attempting to sell its European student housing platform, which managed 7,000 beds and held planning permissions for another 5,000, to GFH, a publicly traded investment bank out of Bahrain. GFH signed a term sheet in the summer but ultimately decided not to invest, citing valuation declines and residual liabilities, according to a letter to investors acquired by Bisnow.
The failed deal leaves the CA Europe business in a “dire position,” former Chief Investment Officer John Diedrich wrote in a Wednesday letter to investors. Diedrich resigned from CA Ventures in June to focus on the GFH deal, according to the letter.
CAVEE, which appears to be the investment vehicle for CA Europe, has creditor pressures exceeding £10M ($12.7M) in past-due accounts payable, taxes and payments to vendors and suppliers, according to the letter. It also has more than £20M ($25.3M) in unsecured lending from third-party lenders, for a total of more than £30M ($38M) in aggregate liabilities on the books.
“Given all of this, CA has no choice but to move forward with a voluntary liquidation of the business to avoid a more costly and punitive court-led liquidation which will commence in December 2024 if CA does not take action,” Diedrich wrote. “As such, CA Europe has begun terminating staff and will reduce to zero employees in the month of November to commence the liquidation process.”
Diedrich didn't immediately respond to a request for comment.
Although CAVEE owns nine assets, eight of which are in partnership with investment firm Harrison Street, assets are expected to generate less than £10M ($12.7M) in net value to CAVEE, Diedrich told investors. Because of its outstanding liabilities, platform owners aren't expected to receive distributions as a result of the liquidation process, the letter says.
In early October, Diedrich wrote in a separate letter to investors that the sale to GFH remained on track, with the transaction expected to close imminently. Diedrich attributed delays in closing the deal to “complicated and time consuming” issues surrounding taxes and legal structuring.
Still, Diedrich wrote at the time that the company remained confident in its ability to finish the deal in the near term.
With the deal scuttled, Diedrich wrote in the Wednesday letter that CA Ventures will evaluate the potential of including the lost CAVEE investment in a broader restructuring planned for other investment vehicles.
“Over the life of CAVEE, CA and [CEO] Tom Scott invested millions of dollars to grow the CAVEE platform,” Diedrich wrote. “Distributions were made when possible. I also made a serious financial commitment that will be lost. We made these investments with the belief this platform was going to be quite successful.”
CA Ventures' overseas challenges add to a laundry list of difficulties the company is battling in the States.
Last month, a group of investors filed a lawsuit against CA Ventures and two of the company's top executives, Diedrich and Scott, alleging the execs misrepresented their intentions for spending investor dollars. The lawsuit says the pair told investors they would use the money to back developments, but instead they used funds to repay maturing loans they had made personal guarantees to pay off.
CA Ventures is also facing up to three foreclosure lawsuits on North Side multifamily properties after falling behind on debt repayment.
In April, former executives got into a legal dispute over whom the company is obligated to pay first after exit agreements, which delayed a planned spinoff of CA Ventures' industrial arm. That deal was set to close earlier this year.
