Knighthead Funding Sues Goodman Again in Migrant Shelter Fight

A Connecticut-based debt firm is waging a two-front war with longtime Chicago developer Scott Goodman over a West Loop real estate loan tied up in the city’s migrant crisis.

Knighthead Funding has moved to foreclose on the $11.5 million loan, taken out in 2021, tied to the 50,000-square-foot building at 344 North Ogden Avenue jointly owned by Goodman and his partner A.G. Hollis, according to a lawsuit filed this week in Cook County court.

It’s the second time Knighthead has sued the property owners alleging they defrauded the lender by kicking out office tenants in order to sign a lease with a migrant shelter operator as the city was scrambling to find makeshift housing for thousands of asylum-seekers bused to Chicago from states on the nation’s southern border, such as Texas.

Knighthead previously sought to collect the personal guarantees that Goodman and Hollis provided to pay the loan as part of the debt against the building, which is owned by an LLC they control. The landlords are fighting that complaint, with a hearing on whether it should be dismissed set for Oct. 22.

However, the lender has escalated the dispute with this second lawsuit. It seeks to have a third-party receiver appointed to take possession of the property and oversee its management while the legal disputes play out, and then to put the property up for auction with the option for Knighthead to credit bid up to the $11.5 million it claims the Goodman-Hollis venture owes.

Goodman, Hollis and their representatives didn’t return requests for comment. Neither did Knighthead and its attorneys.

The lawsuits claim Goodman and Hollis spent months dodging Knighthead’s demands for documentation about the migrant shelter deal, which is bringing in $150,000 per month to the building’s ownership. The property owners also allegedly indicated the lease would be with the city of Chicago; in reality, the lease was to ReloShare, a contractor working with the city on managing the migrant shelter system, the suits said.

The first suit, filed in May, claims the landlords “agreed among themselves that they would enter into the lease for residential use whether or not [Knighthead] approved and further agreed that they would delay, conceal and hide the fact that they had entered into such a lease for as long as possible.”

The second suit reiterates claims that the landlords have missed loan payments since September and breached their contract with the lender by entering the migrant shelter deal.

In response, Goodman and Hollis have said the building’s previous use as an office began to lose financial viability as demand for commercial tenants began to wane during the pandemic. But the migrant shelter deal was presented “serendipitously” to the landlords through ReloShare, and the property owners viewed the opportunity as a way to bring solid cash flow back to the building, which can house up to 650 migrants.

The second suit, filed in Cook County’s chancery division, puts the property on track for foreclosure auction, should a judge side with Knighthead as the case advances. The previous case could end up requiring Goodman and Hollis to cough up cash to repay Knighthead, in the event the landlords are found to have defaulted on the debt.

Editor’s note: The location of Knighthead’s headquarters has been updated in this story.