Former executives of CA Ventures are tussling over a nearly $6 million judgment against the Chicago-based developer, and their fight has held up big investment firms from taking over an industrial real estate platform caught in the middle.
The dispute is between Nishant Bakaya, who was CA Ventures’ chief investment officer from 2017 through 2021, and Michael Podboy, the head of the company’s industrial development arm Centris, which was spun off earlier this year to its financial backers, New York-based Davidson Kempner and Monarch Alternative Capital.
Podboy and a handful of other ex-Centris employees claim that payments they’re owed through their separation agreements with CA Ventures should be prioritized over the $5.8 million that a judge found Bakaya was owed by the company, court records show.
Bakaya’s lawsuit against CA Ventures and its affiliates has stalled the takeover of Centris by Monarch and Davidson Kempner, which was supposed to close earlier this year and rebrand the industrial development platform as Outrigger Industrial. Podboy has intervened in Bakaya’s lawsuit to try to receive payments that he and other Outrigger employees allege they are owed by CA Ventures through a settlement agreement. The court has paused the Centris transition due to Bakaya’s litigation against CA Ventures.
CA Ventures planned to relinquish its stake in Centris to cut out costs of funding the business line while CA Ventures faced other financial and legal challenges. Monarch and Davidson had planned on pumping $350 million into launching Centris, whose signature project is the nearly 1.3 million-square-foot Generation Park logistics development in Houston, started in 2022.
More legal problems have popped up for CA Ventures this year as the developer is hampered by the market slowdown for new construction and sliding property values for projects financed during the cheap debt era, before interest rate hikes starting in 2022.
An investor in a West Sacramento, California, multifamily building developed by CA Ventures and its partners also sued the company last month, alleging that it’s owed the more than $10.5 million it put into the project because the developer failed to come up with funding needed to complete the property that it agreed to contribute. CA Ventures didn’t notify the investor of financial hurdles the project encountered during its construction over the last several years, the lawsuit claimed.
“The reality of the situation is the market has tanked,” a CA Ventures executive who requested anonymity to discuss sensitive company matters said about the West Sacramento project. “Is there a surprise? The building was delivered, and the values aren’t there.”
Company leadership has previously said it’s working to reposition itself by getting rid of assets that aren’t performing as well as originally expected.
Earlier this year, a publicly traded real estate lender controlled by TPG disclosed it had foreclosed on an $80 million loan to a CA Ventures affiliate for a large apartment complex it developed in Chicago’s northwest suburbs.
“We’re in a little bit of a bind,” the CA Ventures executive said. “A lot of people on the lending side are also on the GP side. We have to make them part of the solution.”
Furthermore, an attorney for an affiliate of Canadian investment manager QuadReal — a former partner of CA Ventures in a student housing portfolio that QuadReal took full control of last year — also alleged that CA Ventures owes law firm Polsinelli $12 million for legal work. The CA Ventures executive said the law firm is owed closer to $9 million and the developer has an agreement in place with the law firm to address the obligation.
The executive said QuadReal is attempting to smear CA Ventures with the allegations as a QuadReal affiliate tries to get out of a lease for the River North office building at 448 North LaSalle Street. That’s where CA Ventures was set to move its Chicago headquarters but never did. Still, a student housing entity that QuadReal now controls was put on the hook to pay rents it guaranteed in the building, though the Canadian firm has accused CA Ventures leadership of fraud for striking the lease without QuadReal’s knowledge.
CA Ventures leaders denied that claim and have indicated they’re concerned QuadReal could move assets outside the control of the student housing entity that entered the lease. An attorney for QuadReal didn’t return a request for comment.
CA Ventures has also made a payment that an attorney said he was owed for defending the developer from another lawsuit brought by investors in suburban Chicago development projects that fizzled out, the executive said.
Davidson Kempner declined to comment on the status of its Centris takeover and its transition into Outrigger, and Monarch didn’t return a request for comment. Attorneys for Bakaya, Podboy and CA Ventures didn’t return requests for comment.
The outcome of this week’s court hearing in Podboy’s tiff over the nearly $6 million CA Ventures owes Bakaya isn’t yet clear. The judge’s ruling had yet to be entered into public records as of Friday afternoon but could be released in the coming weeks. Bakaya won the judgment after alleging CA Ventures affiliates owed the money but had missed distributing an installment to him.