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CHICAGO-A Cook County judge has denied a complaint filed by Golub & Co. against the former Block 37 developer, Chevy Chase, MD-based Mills Corp. The complaint sought up to $20 million for a Mills-negotiated lease that was signed before it sold the office component to joint venture partners, Golub and BlackRock Realty Advisors Inc.

Golub filed the complaint March 7 before the court’s chancery division after learning that Mills was going to cancel the JV’s contract to buy the project’s residential component too. According to published accounts, Mills plans to sell the residential portion to another developer.

Eight days after the complaint was filed, Cook County Circuit Court Chancery Judge Stuart Palmed rendered his decision to deny it. Golub’s attorney tells GlobeSt.com that the company has yet to decide if an appeal will be filed.

Golub was asking for $16 million that it contends could be lost over a 15-year term because of a lease dispute between Morningstar Inc. and Mills. Golub’s complaint also sought $4 million for “out-of-pocket costs” related to the dispute.

In late 2005, Morningstar signed a lease for 211,200 sf on eight floors of the 16-story Block 37 building at 108 N. State St. Mills, referenced as Block 37 Office LLC in the complaint, “entered into the lease with Morningstar,” but “was repeatedly advised by its retained architectural professionals that the eight floors in question, as designed by Office’s architect and approved by Morningstar, actually will comprise nearly 240,000 square feet of rentable office space according to BOMA standards,” according to legal documents.

Construction currently is under way on the 16-story office building, which is being developed by joint venture partners, Golub and New York City-based BlackRock Realty Advisors Inc. Mills sold the land and air rights for the office component to the JV in November 2006. The building is 80% preleased to CBS 2 Chicago for a broadcast center and the offices of Morningstar Inc.

In November 2006, Palatine, IL-based Joseph Freed & Associates signed a letter of intent with Mills to evaluate buying the project’s retail portion, which also is under construction. The Golub/BlackRock JV also planned to build two residential towers. A contract, with a $3-million deposit, was signed for the JV to purchase the project’s residential portion from Mills, according to the complaint.

Golub’s president and CEO Michael Newman wouldn’t divulge the purchase prices for the office and residential components. But, he has said the developed complex would cost more than $450 million.

Golub was seeking a lien for $20 million in the event that Mills sold all of its assets. Last month, the Mills Corp. accepted a $25.25-per-share acquisition offer from Indianapolis-based Simon Property Group Inc. and Farralon Capital Management LLC of San Francisco. The JV is paying $1.64 billion for outstanding common stock of Mills and Mills LP. Including assumed debt and preferred stock, it is a $7.9-billion deal.

Mills was represented by the Chicago law firm Chen Nelson Ltd. “We appreciate Judge Palmer’s considered and thoughtful decision and we are happy he ruled in our favor,” Mills’ attorney John Chen says. He declines any further comment on the case.

Howard Swibel, Golub’s attorney, says the company has not decided if it will appeal the judge’s decision. “We are still considering our options. No decision has been made yet,” he says.

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