A struggling suburban Chicago building that was recently marketed as an office-to-industrial development opportunity is caught up in a complex legal battle between its owner Zaya Younan and Royal Business Bank that threatens to cost the landlord his luxury home outside Los Angeles.
The lender last May filed a foreclosure lawsuit against YPI Arlington LLC, the Younan-led entity controlling the 171,000-square-foot property known as One North Arlington at 1500 West Shure Drive. Since then, it has been involved in contentious legal back-and-forth leading to a request for court sanctions against an attorney for the landlord.
Meanwhile, other attorneys for Younan punched back. They filed a lawsuit last month in California, where both he and the bank are based, alleging the bank “engaged in predatory lending and debt collection practices to bleed our client, Zaya Younan, dry,” a statement from attorney Nicholas Lauber said.
In the foreclosure lawsuit, Royal Business Bank alleges YPI Arlington LLC fell behind on property taxes and payments toward a $7.7 million balance on a loan backed by the property, triggering a default. An exhibit in the filing shows that Younan is the organizer of YPI Arlington LLC.
But Younan’s attorney argued that because the mortgage and other documents accompanying the financing of the property were signed by Younan in his capacity as President and CFO of Younan Properties Inc., not YPI Arlington LLC, the foreclosure attempt is invalid. The lawsuit names YPI Arlington LLC as a defendant, not Younan Properties Inc.
Royal Business Bank’s attorneys contend that YPI Arlington’s motion to dismiss the foreclosure is based on a “single, frivolous argument” and asks the court to “disregard YPI’s layered corporate structure.” Exhibits in the bank’s legal filings show Younan’s authorization to sign financial documents with the bank on behalf of multiple business entities within the corporate web.
The case escalated Feb. 26 when Royal Business Bank’s attorneys requested sanctions against YPI’s attorney, Arnold Landis, for making “false allegations without reasonable cause.” Landis, Younan and legal representatives of Royal Business Bank declined to comment.
Younan has long been an active commercial real estate player in the Chicago area, with several office investments that also faced foreclosures after the 2008 recession, according to news reports. And in Texas last year, the Harris County government paid $26 million for a 20-story downtown Houston office building that Younan previously owned and lost to a lender.
Complicating matters further, Royal Business Bank has geared up for another fight after Younan brought a separate lawsuit against the bank last month.
That filing alleges that the bank engaged in predatory lending practices that allowed Younan to take out an $11.8 million promissory note backed by the Arlington Heights office in 2017 that exceeded the value of the property based on an inflated appraisal from the bank, among other allegations. The loan, also backed by a personal guaranty from Younan, was later paid down to $7.7 million and is the same debt the bank says it is owed via its foreclosure complaint filed in Illinois.
The inflated value of the loan made it harder for Younan to avoid foreclosure and could eventually make it easier for the bank to buy the property back in a credit bid at an “artificially depressed price,” the lawsuit alleges. If successful, the bank can then flip the property by selling it at market value, the filing states.
Separately, the lawsuit states that in 2014 the bank approved a $3 million line of credit against Younan’s home in Thousand Oaks, California, that was eventually used to prop up the difficult-to-pay Arlington Heights office loan. The home line of credit was modified several times to allow for extensions that were often brief while racking up modification fees and leading Younan into “inescapable debt’, according to the lawsuit.
Royal Business Bank allegedly neglected to perform proper due diligence in issuing and modifying either agreement, leading the bank to attempt to seize both the Arlington Heights office and the Thousand Oaks home. The bank issued a notices of default regarding the line of credit, stating that Younan was behind on payments and then filed a notice of trustees’ sale of the home in October.
“Royal Business Bank financed a loan to YPI Arlington, LLC for a property already
underwater,” Younan’s filing said, referring to the Arlington Heights office. “After YPI Arlington struggled to make payments, Royal Business Bank chose to double the line of credit against Zaya Younan’s personal residence, so that he could pay their fees and make the loan appear to be in good standing to avoid the attention of underwriters and bank regulators. Essentially, Royal Business Bank set Zaya Younan up for failure so it could take his home.”
The bank’s lawsuits, according to Younan’s attorney Lauber, are a distraction that “masquerade as an attempt to enforce [Royal’s] contractual rights, but are in fact something much more consistent with its unacceptable behavior toward [Younan] throughout this process.”
As Royal Business Bank sought to sell Younan’s home in Thousand Oaks, which an appraisal from the bank valued at $12.7 million, Younan sought ways to have both foreclosures dropped and be given time to pay off his debt.
In email exchanges with the bank, Younan said the foreclosure filings were depressing the values of both properties and would make it difficult for him to sell or refinance them in a way that would cover the debt he owed.
Bank representatives did not agree to dropping the foreclosures and repeatedly said the only courses of action at that point were full repayment of the $12 million in debt owed for both the office and the house, either in cash or in the form of a costly refinancing. Any further settlement discussion required a $500,000 cash payment in exchange for postponing the home foreclosure until March 2025. The office foreclosure is still held up by the bank and Younan’s legal battle in Cook County court.
But Younan alleges that the banks shouldn’t have lumped together the office and home debts into one debt resolution proposal because a prior amendment to the promissory note backed by the office allowed Younan to remove his home as collateral.
“Royal Business has engaged in a predatory practice by leveraging the pressure from
an imminent foreclosure on Zaya Younan’s home to extort further fee payments due to the default on a longstanding failing loan against a commercial property in Chicago,” Younan’s court filing states.
Notices of default issued by Royal Business Bank after the change in term agreement, however, list the office and the home as collateral for the past-due promissory note.
The bank eventually agreed to accept $250,000 in cash to delay the home foreclosure until March 17.
Younan’s lawsuit alleges the bank and its executives Robert Franko and David Morris “explicitly deceived Mr. Younan by requiring Mr. Younan pay $250,000 in order to continue negotiations and upon receipt, refused further negotiations.”
Among other accusations, the filing alleges that bank executive Robert Ross falsely claimed he followed proper procedure for notifying the parties about the defaults and discussing options to avoid foreclosure. The bank “menaced Mr. Younan by disparaging his reputation” by posting public notices of his defaults in multiple locations in addition to notifying him via certified mail, the lawsuit added.
Read more
Commercial
Houston
Harris County pays $26M for Downtown Houston office building
Commercial
Los Angeles
Regus sued for back rent by Younan Properties