DNC's deadbeat Chicago landlord
When organizers of the Democratic National Convention in Chicago were looking for office space, they decided to lease two floors in a CTA building on the Near West Side.
The CTA was leasing the space to a company owned by developer Scott Goodman that's delinquent on its rent. He agreed to sublease some of the space for organizers planning the convention next month at which President Joe Biden is expected to be nominated for a second term. The CTA board approved the deal last August.
Democratic Party leaders say they had no idea the CTA had been hounding Goodman to pay the rent, nor that he also was delinquent in paying the property taxes for those offices at 120 N. Racine Ave., about a mile east of the United Center, where the convention will be held Aug. 19-22.
Goodman's Sterling Racine LLC owed the CTA $1.97 million in rent and $15 million in late fees as of May, according to the CTA.
After Chicago Sun-Times reporters asked about the delinquent payments, the CTA says Goodman reduced the debt to the transit agency to $1.37 million, not including the millions more in late fees.
He also hasn’t paid the property taxes for the CTA space in more than a year. That leaves his company owing $1 million in delinquent taxes even before the latest tax bills, totaling $216,199, come due Aug. 1.
While Goodman was stiffing the CTA on the rent and the Cook County treasurer’s office on the taxes, two other companies he formed bought two other buildings for a total of $44.5 million.
One of the companies paid $4.5 million last August for a Pilsen warehouse that the city of Chicago soon started leasing as a shelter for the influx of migrants last year. That’s the building where a 5-year-old boy died from sepsis. Goodman also has two other buildings that City Hall leases to shelter migrants.
After buying the warehouse, another Goodman company spent $40 million in December to buy a vacant Magnificent Mile commercial building on North Michigan Avenue across from Water Tower Place.
In March, even as the CTA was sending notices to pay the overdue rent, the transit agency’s board reworked a separate, $158 million deal with Sterling Racine. The deal involves building a new training and control center for the agency to replace the building where Democratic convention planners already are working. It also calls for Goodman to buy the property at 120 N. Racine Ave. from the CTA for $35 million.
Despite public records requests the Sun-Times made under the Illinois Freedom of Information Act, the CTA has refused to release copies of Sterling Racine’s subleases with the DNC and other tenants in the transit agency’s building on Racine. It also won’t release emails from transit agency officials regarding the money that's owed.
In a written statement, the CTA says it "finds this situation to be unacceptable and has demanded that Sterling Racine resolve the $1.37 million in outstanding delinquent rental and operational payments owed no later than end of month August 2024. Since May 2023, CTA has sought to work with Sterling Racine to resolve its outstanding debt . . . On May 6, 2024, CTA issued a default letter to Sterling Racine, which has resulted in subsequent payments totaling more than $776,544.
“The May 6th delinquency letter issued by CTA cites an additional $15M in late fees that were incurred by Sterling Racine, which are under active discussion between the parties for resolution.”
Goodman says he will pay all of the rent, taxes and interest owed to the CTA and the Cook County treasurer.
“When COVID hit, those tenants vacated, leaving us with nearly complete vacancy other than our own office space,” Goodman says. “120 N. Racine has been very expensive to carry over the past four years. Sterling Racine has fallen behind in rent and taxes but in no way is going to fail to meet its obligations. It will have to pay late fees to both CTA and the county. The vacancy caused by the pandemic has caused hardships on many office building owners including us.
“Regarding our ability to purchase other properties while being in arrears at 120 N. Racine, the overarching reason is that it is that specific entity (Sterling Racine LLC) that is in arrears. No other entity is in any way associated with 120 N. Racine or subject to its obligations.”
A Democratic National Convention spokesperson says it’s up to date on its rent to Goodman, having paid $677,917 since the start of the lease in September. The rent has been paid by Development Now for Chicago, a not-for-profit host committee headed by Chicago businessman Michael Sacks. That host committee subleases the CTA space from Goodman.
Goodman, 66, is one of the original partners in Sterling Bay, a development company that has built several prominent buildings around Chicago, including the McDonald’s headquarters in the West Loop, a few blocks east of the CTA building, and it also rehabilitated the building that houses Google Chicago offices.
Goodman struck his deal with the CTA in August 2015, agreeing to pay $12 million for nearly 89% of the 107,043-square-foot building under a 10-year lease that expires on Aug. 31, 2025, according to records he filed with the Cook County assessor’s office. In addition to the 10 years, he has two five-year renewal options.
Eight months after signing the deal, a falling-out led Goodman to leave Sterling Bay.
He retained control of the CTA space, where he set up a new company called Farpoint Development LLC.
Goodman has sublet space in the CTA building to other tenants, including a digital sports media company run by Bulls and White Sox owner Jerry Reinsdorf, a logistics company and business associates including McLaurin Development Partners.
Under Goodman’s lease, the CTA has to approve any subleases.
The CTA’s seven board members didn’t respond to messages seeking comment on why they let Goodman sublet to the DNC last August even though he was behind on the rent.
Dorval Carter Jr., the CTA’s president, says the agency has little or no authority to keep Goodman's company from subleasing the space even though it remains in arrears on its rent.
CTA spokeswoman Catherine Hosinski says: “There is little discretion as to what CTA can deny.”
With the CTA failing to release copies of Goodman’s subleases and other records, the Sun-Times was unable to determine how much rent he charged each tenant, whether all of the tenants paid their rent and how much space has remained vacant during each year of the lease.
Goodman has been involved in several projects involving City Hall in addition to the CTA lease.
In 2021, he and casino mogul Neil Bluhm submitted one of the five bids the city of Chicago got to build a casino. Then-Mayor Lori Lightfoot rejected their plan to build a casino at McCormick Place, ultimately choosing Bally’s and a permanent casino at what was the Chicago Tribune’s printing plant.
Goodman also is one of the partners in GRIT Chicago LLC, which plans to redevelop the 48-acre site in Bronzeville that formerly was home to Michael Reese Hospital. Then-Mayor Richard M. Daley bought and demolished the hospital as part of his failed bid to host the 2016 Olympics.
Lightfoot gave Goodman and his partners, including Loop Capital Management and McLaurin Development, a $60 million deal in 2022 for infrastructure improvements needed to build housing and commercial space on the land. So far, the city has paid them $12.3 million.
Goodman and his partners also have an option to develop McCormick Place’s 28-acre truck marshaling yards at 31st Street and DuSable Lake Shore Drive.
Under Mayor Brandon Johnson, City Hall has paid Goodman to house migrants in three buildings he owns, including the Pilsen warehouse at 2241 S. Halsted St. that he bought for $4.5 million last August.
It’s unclear how much money the city has paid Goodman to house migrants in those buildings, which also include 344 N. Ogden Ave. and 1308 N. Elston Ave. That’s because the city doesn’t pay Goodman directly but instead contracts with Equitable Social Solutions, a Louisville company, for migrant services. Equitable contracts with ReloShare, Inc., a Chicago company that pays Goodman for his three buildings. ReloShare didn’t respond to questions about Goodman.
ReloShare billed the city $495,712 to house migrants at all three Goodman buildings during the first week of December. The per-day cost ranges between $16.80 and $21.80 per bed, depending on the building. ReloShare billed City Hall a total of $495,712 — $252,672 for the building on Halsted, $148,428 for Ogden and $94,612 for Elston.
“The migrant housing arrangements were good for me because they filled empty buildings (at market, not inflated rates) and filed an emergency need of the city,” Goodman says in a written response to questions from the Sun-Times.
Goodman and a partner have failed to pay his $11.5 million mortgage on the Ogden property for several months, according to a lawsuit that his lender filed in May. It accuses Goodman and partner Arthur Hollis of fraud, saying they used the money to convert the building to migrant housing instead of offices. Goodman and Hollis deny that.