The road to building the Block 37 site has never been smooth. And even now, after the beleaguered Mills Corp. has exited the decades-old development site, there are still issues. Earlier this month, Golub & Co., which owns the office and residential development on the site, filed a lawsuit against Mills over the development of the site in downtown Chicago.
According to court documents filed in Cook County Court in Illinois, GD Randolph LLC and GD 22 W. Washington LLC, which are managed by Golub, filed a lawsuit against Mills' affiliates Block 37 Residual LLC, Block 37 Office LLC and Block 37 LLC on March 12.
In August, Golub entered into an agreement with Mills to buy the office portion of the Block 37 development. Golub paid "tens of millions of dollars, all in cash, to become the owner of the office component, then under construction," according to court documents.
Morningstar Inc., a firm that provides independent investment research, was slated to be one of the main tenants for the office space in the building.
Golub alleged that Mills misrepresented the amount of space it was leasing to Morningstar Inc. prior to the sale of the Block 37 property to Golub. The misrepresentation, according to Golub, caused Morningstar to pull out of the deal. Simon Property Group, which now owns Mills, did not respond to a request for comment.
According to legal papers, Morningstar entered into a lease for eight floors, or approximately half of the space in the planned office tower. Mills' estimate of the size of that space when the lease was signed was approximately 211,000 square feet. The space is actually 240,000 square feet. The difference in size will, according to court documents, cost the tenant of the space an additional $16 million over the life of the lease.
Golub asked the court for a declaratory judgment and equitable lien, a property lien imposed by the court to achieve fairness, against the Mills affiliates. The company asked the court to hold Mills responsible for the loss of Morningstar as a tenant.
In its complaint, Golub also asked the court to award a number of specific financial damages, including a $3 million deposit, $4 million for out-of-pocket costs and an equitable lien of $20 million. The lawsuit is still pending.
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