QuadReal Accuses CA Ventures CEO Tom Scott of Self-Dealing

QuadReal Property Group has gone from being one of CA Ventures’ biggest backers to an accuser of its CEO with claims of self-dealing on a Chicago office lease and later evicting his own multifamily development firm from the building.

QuadReal — the Canadian asset manager that last month took full control of a 20,000-bed student housing portfolio it previously owned jointly with Chicago-based CA Ventures — leveled the accusations against Tom Scott in a lawsuit filed in Cook County court late last month.

It claims CA Ventures CEO Scott siphoned away money from investors by forcing entities tied to his company to enter a River North office lease. The suit said Scott also had an ownership interest in the office building at 448 North LaSalle Street, which is listed as the global headquarters for CA Ventures, a company claiming to have properties valued at $15 billion worldwide.

Earlier this year, the developer of the LaSalle Street building — a joint venture of Midwest Property Group led by Jay Javors as well as CA Ventures, according to QuadReal’s suit — moved to evict CA Ventures from a lease of about five floors covering a total of about 70,000 square feet.

QuadReal alleges that Scott in 2019, as CEO of CA Ventures, forced entities tied to the company into leases and subleases at the building for above-market rates, and later helped the office landlord sue to evict his own firm. The 10-year lease terms would have had CA Ventures entities pay a total of about $3 million a year in rent, the suit said.

The student housing vehicle into which QuadReal invested was only expected to take one of the five floors in the building that Scott leased for CA Ventures affiliates. Scott nevertheless executed a guaranty that put the student housing vehicle on the hook for the entire lease in the event of a default by one of the other tenants, which were all entities tied to Scott’s company, the suit alleges.

“Scott, as CEO of the various CA entities, breached his fiduciary duties to CA Student Living … by approving the above-market and unreasonable lease and sweetheart guaranty in transactions he stood to benefit from through the excess revenue that would flow to landlord,” the suit said.

Scott and CA Ventures Chief Investment Officer John Diedrich did not return requests for comment. An attorney for the LLC that owns the LaSalle Street office building, whose members are Javors and CA Ventures, according to QuadReal’s suit, did not return a request for comment.

QuadReal declined to comment beyond its public court filings.

The Canadian investor’s suit also claims that CA Ventures never moved into the LaSalle Street office space.

“The planned move to the office space was designed not for administrative needs but to support CA Ventures’ investment in the property,” QuadReal said in the court filing.

Meanwhile, the landlord venture led by Javors and Scott has claimed that the lease guaranty that the student living vehicle entered means it owes $30 million to the building owner, because the guaranty requires accelerated payment of all rent due over the course of the entire lease in the event of the tenant’s default, the suit said.

Scott also hid his and the landlord’s actions from QuadReal while it was buying its interest in the student housing portfolio, according to the lawsuit.

“Moreover, QuadReal did not even learn of the existence of the guaranty until years after it was entered into,” the suit said.

The student living fund once backed by QuadReal had paid $2.2 million in rent for the building, even though it never occupied the space.

“A substantial portion of this rent was wrongfully retained by CA Ventures and used for other improper purposes rather than being remitted to landlord,” QuadReal said in its lawsuit. The fund also chipped in tens of thousands of dollars for tenant improvements inside the office space, but the landlord “wrongfully diverted numerous tenant improvements.”

“Rather than use CA Student Living’s tenant improvement payments to invest in space improvements, Scott wrongfully retained the funds for CA Ventures,” the suit said.

The River North landlord entity earlier this month voluntarily dropped its eviction lawsuit — which had claimed that the CA Ventures tenants were nearly behind in rent by $1 million — court records show. It retains the option to re-file the case under the terms of the dismissal.

Scott is also being sued by individual lenders who gave various CA Ventures entities about $10 million in debt and say they haven’t been repaid. The firm’s former COO, J.J. Smith, is meanwhile nearing the start of a civil trial challenging CA Ventures affiliates and Scott in Delaware court on claims he was lowballed by Scott when seeking to cash out the equity he built up in the firm.

Plus, CA Ventures is being sued by Coyote Logistics for failing to pay its fair share of a luxury spectator’s box at the United Center that two firms were supposed to split in costs. That case remains pending in Cook County court.