Thad Wong and Mike Golden Soo LNR are partners in the Fulton Market deal

Mike Golden and Thad Wong, founders and co-CEOs of Chicago’s largest residential real estate brokerage @Properties, may have come out of the gate with their mixed-use project Fulton Market at 171 North Aberdeen Street.

But they have since hit their stride after reorganizing the business model for the 11-story, 75-unit property and a co-working lease with Industrious that temporarily soured due to the pandemic. Golden said the asset is generating more revenue than ever before.

The only problem is that he and Wong don’t have access to their cash flow and claim in a lawsuit filed late last month that the lender who advanced them $41 million, with the property used as collateral, is holding their earnings — more than $3 million — hostage. In a separate account.

“We made sure that no matter what happened, the loan was always paid back on time. All the cash flow went to them, and they don’t honor the loan agreement to release the net cash flow after everything else is paid,” Golden said. The real deal.

The mixed-use project — which the men developed separately from their real estate business — ran into some problems early in the pandemic. Wong and Golden issued a master lease to co-living provider Quarters, whose German parent company ended up going bankrupt, and Industrious was unable to pay its rent for a while due to work-from-home mandates.

However, the issues with the co-working lease have now been resolved, and the accommodation is operated and rented as traditional apartments. Loan trustees Wells Fargo and LNR Partners, which are named as defendants in the lawsuit, have no other reason to continue holding money beyond what they are owed in principal and interest each month, Wong and Golden said. However, money is still out of the hands of landlords.

Through a spokesperson, LNR Partners declined to comment. Wells Fargo did not immediately respond to a request for comment.

The $41 million commercial mortgage-backed security loan was issued in 2018 to Wong and Golden, who described the asset’s debt as “low leverage” considering the building had recently been appraised at $73 million, according to the lawsuit.

But LNR and Wells Fargo began holding onto all of the property’s revenue in February 2021 after Medici, the parent company of co-living company Quarters, which had leased more than half of the building’s apartments to subtenants, defaulted on the master lease when it entered Chapter 7 bankruptcy and ceased operations. Paying rent to Golden and Wong. Under the loan agreement, proceeds from the property will be transferred to an account controlled by the lender in the event of such a triggering event.

Industrious also defaulted on its lease by failing to make full rent payments after the pandemic hit and several subtenants in its offices stopped paying rent, according to the lawsuit.

However, these issues have since been resolved, and the property consistently generates more than enough revenue to cover expenses, with Industrious paying more in rent than before the start of the pandemic, and even more revenue coming from standard apartments than from co-living. A production was agreed upon, according to the lawsuit.

The property generated $2.8 million in net cash flow last year, after its revenue paid for debt service and operating costs, loan data compiled by Morningstar showed.

The building’s 15,000 square feet of retail space is fully leased, and approximately 95 percent of the residential space is leased. It generated more revenue in the first six months of this year than in the first half of 2019.

The lender and servicer held that additional cash in a separate account that now totals more than $2 million, the lawsuit alleges, and refused to distribute the funds to the building’s property despite their repeated requests. The lender and servicer also kept about $1 million of a security deposit from Medici.

MCZ Development completed the building in 2018 in partnership with Golden and Wong before brokerage heads bought the company’s shares in the property.

“This will be the only CMBS loan I ever do,” Golden said. “It’s frankly confusing.”