When investor John Daley sold a cold storage facility in Chicago’s Archer Heights neighborhood for $95 million in 2021, it seemed like a spectacular exit.
Behind the scenes, though, he was already sparring with his partner in the venture, Gerald Nudo, long a principal of bigtime Chicago office and retail landlord Marc Realty.
Their venture bought the 612,000-square-foot property, at 4220 South Kildare Avenue, for under $17 million back in 2006, and they put about $30 million into improving the property over the years. They more than doubled their investment when Miami-based Scout Capital bought it, seizing on soaring demand for the once-niche asset class, as institutional investors started pouring cash into logistics while the pandemic was straining supply chains.
But Daley last week advanced his battle with Nudo in a quest to capture $51 million in proceeds from the Kildare Avenue sale, plus more than $1 million from the separate $53 million sale of several Chicago-area industrial properties, Cook County court filings show. At the same time, Nudo has sued Daley, alleging he wrongfully withdrew money generated by the properties.
Complicating the case is Nudo’s divorce several years ago from investor Anne Voshel, which occurred while the former couple were still landlords of the industrial properties alongside Daley, who they had partnered with on real estate investments over the previous 15 years.
The legal battle between Daley and Nudo — whose company Marc Realty counts multiple large Chicago office buildings among its holdings, including 55 East Jackson Boulevard — has been drawn out over nearly five years. Lawyers in the cases are preparing for depositions this spring.
At stake is about $50 million in proceeds generated by the windfall Kildare Avenue sale, which has been locked up in escrow while Daley and Nudo’s court cases play out.
Daley alleges he’s entitled to receive the entire profit from the sale, because years prior to the deal with Scout, he offered to buy out Nudo and Voshel’s equity in the property for a little more than $18 million, which would have valued the building at about $37 million.
Their operating agreement for the property said that if such an offer were made, the other side would have a few weeks to match it and take over the company from the party that made the original offer. Daley claims Nudo’s side never matched his buyout offer, and thus Daley should be entitled to $32 million from the Kildare Avenue sale, after paying the $18 million he promised to Nudo’s side during the attempted buyout.
Nudo has disputed that Daley properly triggered the buyout clause and, even before the sale to Scout, alleged Daley had “abused his position and authority” as a manager of the property by “embezzling at least $1.8 million” from the landlord entity.
Daley has denied wrongdoing in that case.
“We have a difference of opinion on this matter, and the courts are going to resolve it for us,” Nudo said in a brief phone interview.
Meanwhile, Daley alleges he is owed a little more than $1 million for his share of the $53 million sale of six industrial properties that closed in 2016, and he has cited Nudo and Voshel’s divorce as part of the reason he hasn’t seen any of the money.
At the closing of the sale, Voshel received more than $12.7 million in proceeds, and Daley didn’t get any, a federal judge wrote last year. Before the closing, Voshel told Nudo she wanted a divorce, and Nudo then asked Daley if he would hold off on collecting his money from the deal so that Nudo could do some financial restructuring in light of the impending divorce. Daley agreed, but Nudo never paid, he alleged.
U.S. District Judge Mary M. Rowland last year dismissed Daley’s case regarding that deal, over what Daley’s lawyer said were technical jurisdictional issues. The case Daley just filed in Cook County court seeks to revive the allegations in the right venue.
“Nudo’s allegations against Daley were made without a good-faith basis, and the Kildare Avenue buyout agreement will be upheld,” said Ronald Stearney Jr., an attorney for Daley.
An initial court hearing in the $1 million dispute over proceeds from the industrial portfolio sale is set for April, while a hearing is scheduled for next month in the case over the Kildare Avenue sale.