Judge dismisses Freed's defenses and counterclaims on Block 37
(Crain's) – The foreclosure battle over Block 37 seems to be winding down as the judge recently threw out the defenses and counter-claims waged by developer Joseph Freed & Associates LLC against Bank of America Corp.
The bank, in turn, earlier this month filed a motion for summary judgment seeking $177.85 million that it says is now due on the construction loan for the four-level mall at 108 N. State St. that opened last November – just a month after Charlotte-based B of A filed its foreclosure lawsuit.
Lawyers for the bank and Freed are slated to file written arguments and then plead their cases on Nov. 19 before Cook County Circuit Court Judge Margaret Ann Brennan.
A ruling against Freed, which could come that day, would pave the way for the bank to take ownership of the mall.
“The end is nearing,” says Ron Damashek, an attorney with Stahl Cowen Crowley Addis LLC, who specializes in real estate and banking litigation, and isn't involved in the case. “Once the defenses to a foreclosure are gone, it's really just a question of did you pay – and if you didn't – how much is due?”
A spokeswoman for Freed notes that the Chicago developer, who took over the star-crossed project in early 2007, has a challenge to the court's appointment of a receiver that could be taken up by the Illinois Supreme Court.
Also up for consideration by Judge Brennan on Nov. 19 is a motion to intervene by U.S. Bank, which in July sued to foreclose on a loan it made to Freed for plans to build residential and hotel towers atop the mall.
“There is a lot still going on with respect to this litigation,” the spokeswoman says.
A B of A spokeswoman had no comment.
Freed had contended in its defenses and counter-claims that B of A, which inherited the Block 37 loan when it acquired LaSalle Bank in 2007, interfered with Freed's ability to lease the development and improperly refused to approve new terms for a lease with the movie theater Muvico.
The bank countered that Freed had already acknowledged in writing that the loan was in default when the Muvico proposal surfaced, so the bank wasn't obligated to sign-off on the deal or approve any additional construction funding.
“There are no facts that allege how there was any abuse of discretion or any wrongdoing by the bank in failure to approve the lease or fund the draws,” argued the bank's attorney, John H. Anderson of Seyfarth Shaw LLP, according to a transcript of the Aug. 13 hearing where Judge Brennan dismissed Freed's defenses.
Another matter discussed during the hearing was Freed's efforts to bring in new partners to repay B of A.
Freed's attorney, Daniel Lynch of Lynch & Stern LLP, said the developer wanted to obtain information from the court-appointed receiver about letter-of-intent agreements being signed with prospective retail tenants at Block 37.
“My clients owe a significant bank loan and are looking for ways to pay their obligation in a way that satisfies the bank, and if there are letters of intent for tenants of any significance, we are entitled to know that because it directly affects the value of our property,” Mr. Lynch said, according to the transcript.
The attorney for the receiver objected, but one of the bank's attorneys suggested a specific request could be accommodated.
“If they (Freed) have a potential take-out lender that is analyzing the leasing and that lender is asking for information about letters of intent, at that point, they could make that request,” said Seyfarth's Alvin Kruse. “If they have a real-live refinancing that's being negotiated and they need that information as part of the lender's due diligence, then at that point ask for it.”
Judge Brennan ultimately took that suggestion, and said the receiver wasn't required to provide such information to the developer.
The Freed spokeswoman, when asked to comment on Freed's progress in bringing in new partners, would only say: “We are exploring all of our strategic alternatives.”
