Flex-office startup Industrious has been sued by the owner of an eight-story building at 600 West Jackson Boulevard for alleged fraud, breach of contract and a violation of Illinois’ Uniform Fraudulent Transfer Act.
Stockbridge Capital Group claims that Industrious hasn’t paid rent for its location at the Jackson Boulevard building since April and is now abandoning the space ,along with $4 million in payments on a lease that runs until 2030, Crain’s reported.
According to the lawsuit, which was filed in Cook County Circuit Court, Industrious told Stockbridge in August that it was shutting down the location. The special-purpose entity named in the lease is responsible for it, not Industrious itself. The entity offered $14,000 to the landlord to settle the outstanding rent because it “effectively had no assets,” the complaint states.
Industrious took over the space when it acquired Assemble, a co-working provider that initially signed the lease for the building’s first floor in 2014.
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Industrious spokesman Corey Chambliss declined to comment on specifics of the lawsuit but told Crain’s the location “was a legacy leased unit that came to us via an acquisition and as such, we made the difficult decision to shut it down.”
Industrious is known for signing management agreements with its landlords to operate flexible office spaces, while its co-working competitors would sign traditional leases. The Industrious business model allows landlords to share the benefits of co-working, along with the risk that comes along with it.
Stockbridge alleges in the complaint that when Industrious took over the space from Assemble, the company led the landlord to believe Industrious itself “would be financially responsible for the lease’s assignment,” even though the special-purpose entity was named on the lease.
The suit also accuses Industrious of telling its users at the Jackson Boulevard location to work from other nearby spaces, effectively draining income at Stockbridge’s property.
Industrious is reportedly going public sometime in 2021, and has been rapidly expanding during the pandemic. In October, the company said 600,000 square feet of new space has opened or was announced to open this year.
The company has seven downtown Chicago locations, including a new 52,000-square-foot space at Willis Tower that is set to open early next year.
[Crain’s] — Akiko Matsuda