The owners of an office building that was converted into a migrant shelter last fall are facing a lawsuit from their lender, which alleges they converted the property without permission and lied about it.
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An affiliate of lender Knighthead Funding filed a lawsuit claiming a venture helmed by local real estate investor A.G. Hollis and developer Scott Goodman defaulted on an $11.5M loan tied to its 50K SF property at 344 N. Ogden Ave., Crain's Chicago Business reports. Knighthead alleged in the lawsuit that the building owners haven't made loan payments since October and that they engaged in a "fraudulent scheme" to sign a lease aimed at sheltering migrants, the outlet reports.
Knighthead is suing Hollis, Goodman and their venture for breach of contract, fraud and intentional misrepresentation and seeks a court order for the borrowers to pay off the loan in full.
Knighthead alleged that in September, the landlord signed a lease with a city subcontractor, ReloShare, to turn the office building into migrant housing, but it didn't get lender approval for the deal. The terms of the mortgage required the lender to approve the migrant housing proposal and deal itself, according to the suit.
The complaint alleges Hollis and Goodman signed the lease and then intentionally misled the lender by telling Knighthead they were only considering a lease. The owners agreed to "delay, conceal and hide the fact that they had entered into such a lease for as long as possible," according to the lawsuit.
The lender said the owners did not confirm they had completed the lease until March 21, Crain's reports. Knighthead's investment committee rejected a proposal to convert the building to residential use in November.
The joint venture paid almost $10.9M for the building in August 2016.
In a statement to Crain's through a spokesperson, Goodman said he and Hollis "deny all claims in the complaint and will vigorously defend the allegations."
Goodman, the CEO of Farpoint Development, didn't immediately respond to Bisnow's request for comment.
As of October, 10,000 migrants were living in the city's 20 shelters, many of which were underused office buildings and converted hotels, ABC7 Chicago reported.
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