The guarantor of a loan against a South Side shopping center is raising a stink with its owner.
The Brazilian billionaire who owns Yards Plaza in the Back of the Yards neighborhood and was hit with a foreclosure complaint earlier this year is facing new allegations from a guarantor that he withheld the fact that it was built on top of a slowly sinking landfill, BisNow reported.
Wilmington Trust NA claims in a new lawsuit that Michael Klein and his companies didn’t disclose the fact the 261,000-square-foot retail property was built on a landfill in 1990. When his companies, MikeOne EK Houston Holdings and MikeOne EK Chicago Holdings, defaulted on a $51 million loan last year, they $44 million in outstanding debt against that property and another in Houston.
Wilmington discovered the persisting issue when it found an engineering report from February 2020 that found that the space leased by anchor tenant Burlington Coat Factory had sunk as much as 8.5 inches.
The report explained how ground sinkage issues have led to cracks in the building’s facade, “abrupt elevation changes” in the parking lot and sidewalks and visibly uneven floors. In addition, sinking structural pillars have jeopardized the stability of the roof.
The property requires millions of dollars of repairs, the suit claims. It said structural engineers were aware of the potential for structural caving when the property was built in 1990, and that it has been happening unabated since then.
Wilmington also claims Klein unsuccessfully tried to lift the sinking and uneven concrete in attempts to solve and conceal the problem. The “slab-jacking” made the problem worse, however, as the job was done with more concrete instead of polyurethane, adding to the weight of the already sinking slab.
In the suit, Wilmington said when Klein borrowed the $51 million loan in 2014, his company attested there weren’t any defects or damages to the property, which the borrower allegedly knew was false.
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— Victoria Pruitt