Bankruptcy hearing indicates boom-time project could finally get off the ground
Irish Times, by Simon Carswell
CHICAGO — Walk south along the shore of Lake Michigan and next to a busy underpass before the Chicago River you will find a big hole in the ground. Into this cavern, surrounded by snow last week, Anglo Irish Bank poured almost $70 million (€51 million).
This is the foundation of the proposed Chicago Spire, the ambitious project unveiled by Dublin property developer Garrett Kelleher in 2008 to build the highest building in North America. The timing could not have been worse, falling on the eve of a property crash and financial crisis that brought down his main financier, Anglo, along with his plans.
The dormant two-acre construction site at 400 North Lakeshore Drive could be a metaphor for the Irish banking collapse, the black hole into which large sums of money have disappeared.
Recent activity in Chicago’s bankruptcy court has, however, raised the possibility of the project being resurrected. Kelleher’s Shelbourne North Water Street has proposed a deal to emerge from bankruptcy and build the 150-storey twisting tower. Could this be the biggest phoenix to rise from Anglo’s ashes?
There were skirmishes in court this week over Kelleher’s proposal to proceed with an investment of up to $135 million from Atlas Apartment Holdings, a Chicago property company, presented to the court earlier this month. This week’s dispute concerned the financing of day-to-day expenses and taxes incurred on the site through the bankruptcy process over the coming months. It was resolved with Related, a US property company which last year bought $95 million of Shelbourne’s Anglo and other debt connected with the spire, agreeing to provide up to $1 million in bankruptcy financing.
As for the much bigger tranche of funding to repay Shelbourne’s debts, Related noted that, according to Shelbourne, Kelleher had been “working ‘day and night” on multiple continents, to obtain financing to fund a plan to pay creditors in full”. The company described the $135 million Atlas proposal as “illusory and a sham,” claiming that it failed to stipulate that Atlas and Shelbourne still had to find third-party financing of at least $100 million to pay off creditors.
Shelbourne is trying to find out what Related paid Nama for the original Anglo debt. Related, which sold Kelleher the lake-front site for $64 million in 2006, and the State loans agency have refused to release the figure. The company seems to have its own plans for the site.
Bankruptcy judge Janet Baer will hear the merits of the Atlas proposal on March 10th.
The project undoubtedly has strong support from politicians and planners in the Windy City. However, the prospects of the Santiago Calatrava-designed tower being built will hinge on economics.
At an estimated building cost of more than $1 billion, the 1,200 apartments in the tower will have to sell for at least $2,000 a square foot, well above average prices paid in the city, for the project to be viable.
Kelleher shifted about 360 apartments when the project was sold in a high-profile international road show in the first half of 2008. About half were overseas buyers.
It took the best part of a decade for businessman Donald Trump to sell most of the 486 apartments in his Trump International Hotel & Tower – and that property carried the name of a high-profile promoter and was closer to the prime location along Michigan Avenue and Chicago’s Magnificent Mile.
Since the crash, the Chicago market has rebounded. Demand to live in the city and a shortage of supply of high-end apartments has pushed up prices to just below their 2007 peak. In addition, Shelbourne hopes US investor visas that will come with the apartments will entice foreign buyers.
Shelbourne’s lawyer Tom Murphy is upbeat that the spire will be built given that the interest of buyers will be “enhanced” this time around as they hope to relaunch the project in a rising market.
“This is going to happen,” he said.