COMMERCIAL REAL ESTATE DECEMBER 8, 2009
****Push to Finish Tallest Tower ****
Seeking Jobs, Chicago Workers May Lend $170 Million to Restart 150-Story Building
CHICAGO – The stalled construction of North America’s tallest building, a 150-story luxury residential tower planned for downtown, may get a boost from unionized construction workers desperate for jobs.
Construction workers in Chicago are trying to put together their own stimulus package by helping to refinance and restart work on the Chicago Spire. The twisting, 2,000-foot, Calatrava-designed residential tower would be the tallest building in North America. WSJ’s Joe Barrett joins the News Hub to preview his piece.
Any effort to save the Chicago Spire faces major hurdles, especially coming after a real-estate glut that flooded Chicago with new condos. Plans call for the 2,000-foot-high Spire to have nearly 1,200 units – more than are expected to be completed for the entire downtown area in 2010. Prices start at $750,000, with the bulk of the condos costing $2 million to $15 million.
Workers broke ground with great fanfare in 2007, but the project stalled last year amid the financial crisis when funding dried up. That left many doubtful that the Santiago Calatrava-designed tower would ever emerge from the circular foundation that sits about a block from Lake Michigan.
Now a group of union pension funds is conducting due diligence on a plan to lend $170 million to Irish developer Shelbourne Development Group, said Tom Villanova, president of the Chicago and Cook County Building and Construction Trades Council, which represents 24 unions with some 100,000 members.
Mr. Villanova said the individual pension-fund directors, along with an AFL-CIO pension fund and a union life-insurance fund, are working on a loan package secured by the development site that could be announced in coming days.
Unions have been active investors in the Chicago construction market for years, with one AFL-CIO fund investing about $1 billion in the area. However, the Spire comes at a particularly risky time and on a scale all its own.
“It’s about jobs for my members,” Mr. Villanova said, adding that the project could mean 7.5 million man-hours of work over the next four to five years – equivalent to roughly 900 full-time jobs for the hard-hit unions, some of which face unemployment as high as 30%.
Kim Metcalfe, spokeswoman for Garrett Kelleher, executive chairman of Shelbourne, said union financing would allow the developer to pay off its original land loan from Anglo Irish Bank and other creditors, and to resume work in January bringing water and electricity to the site.
She said the group is confident it can secure financing to complete the building, which she said would cost “significantly” less than $2 billion. “We are obviously in an extremely good position with more than 30% of the units sold and $194 million of [Mr. Kelleher’s] personal money in the building,” she said.
Shelbourne launched a sales push for the Spire in September 2007, when the high-end market was still doing well. Sales were brisk in the first four months, with a mix of U.S. and international buyers, Ms. Metcalfe said.
The showstopper was a two-floor penthouse of more than 10,000 square feet, with 360-degree views and an asking price of $40 million. It was snapped up by reclusive Beanie Baby magnate Ty Warner, she said.
After the project ground to a halt, Anglo Irish Bank, the original lender, nearly collapsed and was nationalized. Mr. Calatrava, the Spanish architect, said he was owed $11 million in fees. Bank of America Corp., one of the creditors, filed suit in U.S. District Court seeking $4.9 million, and Shelbourne countersued. The suits are pending.
The Spire got an unlikely break in early October with the demise of Chicago’s hopes to host the 2016 Olympics. Mr. Villanova, who was on Chicago’s Olympic bid committee, said the unions had committed to help fund the Olympic Village to house athletes. “When that went south on us, we started focusing on the Spire project,” he said.
After cranking out an average of 4,500 new condo units a year downtown for the past four years, Chicago developers expect to complete 900 units next year and fewer than 100 in 2012, said Gail Lissner, vice president of Appraisal Research Counselors, a Chicago appraisal and consulting firm. “We don’t see cranes in the sky anymore,” Ms. Lisser said, which could mean the Spire would arrive in a much-changed market in four or five years.