SPNA Faces Lawsuit Over Gold Coast Condo Deconversion

An investment group has filed a lawsuit against executives at Strategic Properties of North America, stemming from a condo-to-apartment project three years ago in Gold Coast.

The family of Chicago investor Joseph Cacciatore allege that SPNA committed fraud, self-dealing and mismanagement over the 163-unit building at 21 East Chestnut, Crain’s reported. The plaintiff claims that Yitzy Klor and Saul Kuperwasser didn’t hold up their end of the bargain, and now the property is on the brink of foreclosure as about $51 million in debt approaches.

In recent years, SPNA has been one of the most prolific condo deconversion firms in the Chicago area — an increasingly common trend as apartment demand remains strong in the Windy City.

Cacciatore and SPNA teamed up on the Gold Coast project in 2020. Klor and Kuperwasser acknowledged that the pandemic and market conditions contributed to an unsuccessful venture, but they deny wrongdoing. The SPNA executives recently asked for an additional $1.5 million from the Cacciatores to help stabilize the property, saying they were short on cash to cover unspecified costs, but the family didn’t comply, the outlet reported.

The lawsuit mainly focuses on an alleged breach of an agreement in which Klor and Kuperwasser were supposed to match the Cacciatores’ $6 million investment in the property. Instead, unbeknownst to the family, the SPNA executives took out a $40.8 million mortgage on the property and a $10.2 million mezzanine loan.

The lawsuit alleges that the pile of debt could have been evaded if they paid their $6 million share. The $51 million mortgage was set to mature in April, but the SPNA executives negotiated an extension of the due date to July 9.

Klor and Kuperwasser asked a judge to dismiss the case last month, claiming the allegations are rooted in frustrations over the costliness of the project, rather than illegal acts. The executives blamed the pandemic and market conditions for the situation, the outlet reported.

“Rather than honor their obligations under the LLC agreements, [the Cacciatores] grew impatient, and brought this baseless lawsuit,” the executives wrote in a motion to dismiss the complaint.

However, there is some legitimacy to the claim that the lawsuit is “baseless.” As part of an earlier agreement with SPNA, the Cacciatores don’t have the rights to sue on certain matters, the motion says. Plus, the executives claim they weren’t contractually obligated to pay into the deal.

The Cacciatores also allege that the executives profited by charging excessive closing and acquisition fees worth nearly $6.7 million at the front end of the deal. They also concealed information about the property from the Cacciatores, according to the complaint.

—Quinn Donoghue