CA Ventures’ Landlord Evicting Multifamily Giant in Liquidity Crunch

CA Ventures, a Chicago-based multifamily giant claiming to have assets valued at $15 billion worldwide, is in a crunch for cash and facing an eviction from its headquarters and a United Center luxury box, a series of lawsuits filed in the last two months show.

A River North office venture of Jaime “Jay” Javors is pursuing an eviction against CA Ventures from its 74,000-square-foot space at 448 North LaSalle Street, according to a lawsuit filed last month in Cook County court. Javors, the owner of the 12-story, 172,000-square-foot building, claims that CA Ventures owes more than $334,000 in unpaid rent, according to a July letter from the landlord included as an exhibit in the suit.

Javors’ litigation preceded a separate lawsuit against CA Ventures affiliates filed by a freight company called Coyote Logistics, which says it partnered with the developer on a deal on a United Center luxury box. The box provided access to Chicago Bulls and Blackhawks games and other events, but the suit contends that CA Ventures stopped paying its fair share for the tickets. Coyote claims CA Ventures missed May and August payments for its 50 percent share of the seats, and now owes almost $459,000 to the logistics firm in the deal.

The additional lawsuits were uncovered after The Real Deal this week revealed individuals who loaned a total of $10 million to CA Ventures affiliates in late 2021 and early 2022 are alleging the company defaulted on the debts. It’s unclear why a company of CA Venture’s apparent size turned to individuals rather than a financial institution for those loans, and it has not fully explained how it came to be in the financially precarious situations.

“We had a large capital transaction set for the end of July, which did not close,” CA Ventures CIO John Diedrich told TRD in an email Friday. “We’re in the process of closing a couple of alternative transactions, in-place of the previously planned transaction, and expect to have these notes and matters paid off shortly.”

Diedrich did not answer follow-up requests for additional details about the previously planned transaction or the reason it fell apart. The individual lenders who sued the firm for the $10 million in debts alleged the CA Ventures affiliate that owed them money had $37 million in additional outstanding debts and was on the hunt for a private equity firm that would provide the developer an unsecured loan of about $10 million on a five-year term to help pay off its debts. It’s unclear whether Diedrich was referring to that transaction or another.

Attorneys for the plaintiffs in the lawsuits either declined to comment or didn’t return messages.

CA Ventures entered both the United Center deal and the lease in 2019, the suits show.

The tough financial position of CA Ventures is extraordinary considering its growth into a giant in the niche sectors of student and senior housing while also branching into traditional apartment buildings since being established by founder and CEO Tom Scott in 2004.

For Javors, the eviction puts a big hole in a building also exposed to the ailing WeWork, which leased 60,000 square feet in the building when it opened a few years ago. WeWork warned this month that its future as a company is in doubt, raising the specter of potential blocks of vacancy for commercial landlords across the globe.

CA Ventures was on the hook to pay $2.8 million annually in the first year of its decade-long lease with Javors, with the costs escalating to $3.5 million in the final year, according to court documents.

An $85 million loan that CA Ventures took out from much-scrutinized multifamily lender MF1 in 2021 may provide a clue into why the firm has been bleeding cash.

CA Ventures borrowed the sum from MF1, which sold off the interest in the loan to bondholders in securitized debt markets. CA Ventures used three senior housing assets it developed as collateral, including two in the suburbs of Chicago and one in the Kansas City area.

While it’s unclear how much CA Ventures’ broader struggles are due to the performance of its senior housing assets, this portfolio and its debt quickly proved to be financial trouble. CA Ventures borrowed at a 5.9 percent initial interest rate, with floating terms going to a maximum of 6.9 percent, loan data shows. The debt was issued shortly before the Federal Reserve began jacking up interest rates to combat inflation.

The borrower’s debt service payments, which consisted of interest only, have jumped. And the occupancy of the properties pledged as collateral — they include a total of 308 units of senior housing with the suburban Chicago properties located in Grayslake and Wheaton — has declined, according to credit ratings agency Morningstar.

The combination of rising rates and vacancies in the senior housing portfolio coming out of the pandemic is squeezing CA Ventures, according to loan commentary from Morningstar. The landlord lost $500,000 on the three-property portfolio in 2022, attributed to debt service and the operational costs of the assets. The Grayslake property has particularly troubled the firm compared with the other two assets. The loan has been watchlisted by its servicer, Keybank, typically a sign a debt is considered a risk for loss and the borrower isn’t hitting financial performance goals.

“Increased rates and slowed lease-up at the Grayslake property are bringing debt service coverage ratio down. The current operator is working to decrease agency labor along with focusing on lead generation to drive occupancy and income,” the loan servicer said in its July report.