Lake and Forest project granted extension with conditions

Oak Park village board, developers agree it's the last chance for project

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By Anna Lothson

Staff Reporter

With assurances from two internationally renowned commercial real estate firms, a list of conditions and new check points on the calendar, Oak Park trustees granted Lake Street Investors the necessary extension to see if the long-delayed Lake and Forest project can come to fruition.

Monday's discussion about the future of the development proposal to bring a 20-story retail and residential mecca to downtown Oak Park kept trustees questioning the decision about continuing the agreement with Lake Street Investors since it has missed multiple important deadlines recently including the closing date, transfer of property and construction launch date.

The end agreement that trustees unanimously voted on Monday was to allow Lake Street Investors to have until Feb. 28 as a hard deadline to present its equity and financing plan, but also agreed the group will come back to the board by Jan. 15 with a formal update. The closing date is set for April 30 and construction is to start by May 15.

The biggest factor that gave the trustees confidence to move forward was the announcement that Golub & Company, a Chicago-based international real estate development group, and Wood Partners, another well-known developer of multi-family housing, would be backing the project.

Loretta Daly, the village's business services manager, said staff's recommendation was to grant the investment group the extension, citing two reasons.

First, she said, real work has been done on the construction documents which are nearly completed. Lake Street Investors says it has already invested $1.5 million in the architectural work and permitting process. Second, Daly cited the opportunity to capture TIF dollars related to this particular parcel if the work moves quickly.

Staff also cited three financial concessions the developer has now offered in its bid for the extension. The developer has assumed financial responsibility for all repairs to extend the life of the Lake and Forest parking garage for another 8 months; this comes with a $75,000-100,000 price tag on the village-owned garage that will be covered by Lake Street Investors. The group also agreed to put up an extra $15,000 for any additional incidental expenses that may occur over the next several months.

The final item involved an agreement by Lake Street Investors to put up $200,000 to make up for any potential TIF dollars that would be lost from a delay on the developer's part if a loss was to occur. Once Daly revealed the village had a $500,000 figure in mind, Trustee Peter Barber was quick to criticize the difference.

"I just find that a little problematic. It bothers me in the sense that this is a major multi-million dollar investment that's going on here," Barber said. "Coming in at $200,000 on $500,000 does not seem in the spirit of negotiation, particularly given that there's a lot of disappointment, obviously in the sense that it hasn't been going well."

He pointed to the developer's inability to break ground and meet deadlines.

Michael Glazier, the original face of the project who recently moved from Lake Street Investors to Golub, responded to Barber's points by suggesting Lake Street Investors has shown its commitment by making a $1.5 million investment to date. He said the burden has not been on the village to step up and make the same commitment.

That $200,000 figure, however, became a negotiating point for the evening and eventually caused Village President Anan Abu-Taleb to call a brief recess for the team of investors to consider making a better offer.

Glazier was joined by Michael Newman, president and CEO of Golub, and a representative from Wood Partners — another development group looking to join the project.

Rolando Acosta, the investment group's attorney, spoke with the developer trio and came back with an amount up to $250,000 as a guarantee to make up for any potential TIF funding loss.

Trustees said it's important to note that the village only has a written redevelopment agreement with Lake Street Investors, and not Golub and Wood, but trustees felt more comfortable after hearing Golub and Wood will eventually be the primary partners in the project.

"We're not going to come into a situation without knowing we can get it done," said Golub's Newman. "We would bring all of our resources forward to make this deal happen."

Newman assured the board the dates were "hard and clear" and said the group would be done if they couldn't commit to that date.

"This is sort of the exact type of projects we like to work and one we think we can execute well," Newman said. He also said he feels Oak Park is positioned in the capital market for a multi-family residential and retail project.

"It gives me a certain level of confidence that you are here presenting about your company," said Abu-Taleb. Still, he conveyed concerns about being misled in the past.

"I want to make sure we are operating on the same page. …I hope we can work together," he said. "We don't want to be left at the alter one more time."

Overall, trustees remained on the same page throughout the evening's discussions and relayed concerns about the constant delays, the lack of transparency with the village on the project's progress and the recent deadline lapse.

"Personally, I've been very troubled by the lack of forthrightness in financing," Trustee Adam Salzman said via phone during the meeting. He suggested having the deadline for determining both the equity partnership and the other financing in place by the end of the year, but the developers said they needed until the Feb. 28 date to feel comfortable. The developers agreed to bump the date to secure equity to Jan. 15, but said the February date for all financial aspects would be ideal.

Trustees eventually agreed the February date was appropriate given the holidays and how long it takes to ensure the project is executed properly. Trustees were also sensitive to the fact that Golub just joined the project and that Lake Street Investors lost a major funding source after the unexpected death of a major partner early in 2013.

Another aspect of the discussion was the lawsuit Lake Street Investors faces with PNC Bank for defaulting on its $4.5 million mortgage on the Oak Park property, but Monday's talks also provided some assurance that that deal will be worked through.

"We're working with PNC," Newman said.

Glazier jumped in to say that the bank has been cooperative and said "they want to see the project to move forward." He encouraged the bank to reach out to the village.

"It's the past of least resistance for them" Glazier said about working on a resolution with the bank. Golub discussed the possibility of buying the past due note and solving the matter.

Monday's meeting ended with a compromise between the village board and the developers. Both sides, however, agreed the Lake and Forest development — if it can happen — will benefit Oak Park.

"I want to take a deep breath and make sure there isn't a misunderstanding," Trustee Ray Johnson said. The frustration has been about the process, not the project itself, he said. "This is a good project for Oak Park."

He said not approving the extension would send a bad message to the development community and said the village needs to do whatever is needed to make sure the project is done so the attached garage is not left in isolation.

"Honestly if this doesn't happen by Feb. 28 our lives are even more complicated than they are today," Johnson said. "We need to be crystal clear to the public that we don't own the land. …I want to continue to stand behind this until Feb. 28.

Contact:
Email: anna@oakpark.com Twitter: @AnnaLothson

Reader Comments

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Comment Policy

dystOPia from Oak Park  

Posted: March 4th, 2014 7:43 PM

At the Oct. 21, 2013 board meeting, the village board agreed that the developers for the Lake / Forest redevelopment site would be required to obtain equity financing by January 15, 2014, and obtain debt financing by February 28, 2014. This was not placed on the March 3, 2014 board meeting agenda, so the residents of Oak Park need to ask .... now that the deadlines have come and gone, where is the financing?

dystOPia from OP  

Posted: October 28th, 2013 10:31 AM

@JBM ... Feb 28 is the hard deadline for Lake Street Investors to produce evidence of commitment for equity and debt financing for this project, as well as developer financial statements. If this does not happen, Golub goes away with no risk, and Lake Street Investors (and their debtors), and the village are left holding the bag. If this does happen, the village has until April 30 for discussion and review, so as to complete closing. As you stated, construction is to start by May 15

John Butch Murtagh from Oak Park, Illinois  

Posted: October 27th, 2013 7:23 PM

I agree 100% with Bridgett's analysis. Contacting PNC made huge sense. It allowed the village to assess the feasibility of whether PNC was going to force bankruptcy on the investors and developers. PNC said they would hold off on the lawsuit until the village and investor/developers could restructure ownership, management equity, etc. Essentially, PNC and the Village gave the investors/developers a chance to save the project. If they cannot show sufficient financing to ensure the project and do not break ground by May 2014, the board can withdraw from the project and leave the investor/developer work things out with PNC. As far as dirty or illegal goings on taking place, I have seen no evidence to support that viewpoint.

Bridgett from Oak Park  

Posted: October 27th, 2013 5:26 PM

And lastly, I'm not sure how the taxpayer is "getting screwed if this deal goes through." Right now, because the parcels' property taxes have been reduced from over $85K in 2006, to less than $14K in 2012 ( one big reason is that they are now vacant lots), and because there is no other taxes like sales taxes being generated from those parcels, the taxpayer, right now, is carrying the burden. Developed land eases the tax burden. It doesn't add to it.

Bridgett from Oak Park  

Posted: October 27th, 2013 5:18 PM

The property taxes are paid up on the three parcels that make up this development. So I'm not sure I follow what you are saying about tax liens.

Bridgett from Oak Park  

Posted: October 27th, 2013 5:07 PM

The Village will pay who? PNC? Why would the Village pay PNC? Pay them for what? {{confused}}

Follow the Money from Who is paying for this ... Me the Taxpayer?  

Posted: October 27th, 2013 6:07 AM

Bridgett, PNC wants the deal so the Village will pay them more. Where do you think the money is coming from? This deal is dirty? The next buyer can get the property for penny's on the dollar. The Schools and the Village hold tax leins. The taxpayer is getting screwed if this deal goes through. Plus it is not legal. The Black Hand behind this deal is evil.

Bridgett from Oak Park  

Posted: October 26th, 2013 10:49 PM

@Village Idiots, The Village and PNC have been in communication. And according to the Village attorney, PNC was in favor of the extension.

Village Idiots  

Posted: October 26th, 2013 5:48 PM

Until this situation with PNC is resolved, all discussion (here on this board, and with the village) is nothing but wasted finger motions and oxygen. No lender will even consider a deal until the certainty of who controls the property is determined. Folks, the village is as desperate as the developers to make this happen. Sad to say, it just won't get resolved in time and it will be back to the drawing board come summer 2014. Too complicated, too little momentum now to see this through.

John Butch Murtagh from Oak Park, Illinois  

Posted: October 25th, 2013 1:17 PM

If the board is incapable of making business decision, and I believe they are capable, then the only resolution for a resident is at the ballot box. If you don't think a board member, then vote the member out of office. The rules of the game are that if you elect them, you have to live with them. Remember, for the first time in a long time, we have a board that has business savvy and skill. There are some bugs the board has to shake out -- it is a NEW board, but the early signs point to their being dynamic and forward thinking.

Q from Oak Park  

Posted: October 25th, 2013 12:52 PM

dystOPia from OP Flag comment as inappropriate Posted: October 25th, 2013 8:45 AM What do you think is going to happen when nothing has happened and as Johnson says his live is going to be even more complicated with this. It's very simple to resolve this but not one person understands what to do. The board members are not qualified to make business decisions.

dystOPia from OP  

Posted: October 25th, 2013 8:45 AM

@Bridgett ... if the board did not approve an extension, the PNC lawsuit with the developer-owned parcels along Lake St. would likely end in foreclosure, leaving the vacant weed patch in limbo for years. The village would also have to deal with the liability from their existing parking garage, from years of deferred maintenance and repair. Given that reality, the board is hamstrung. The other issue is that the Colt/Westgate project is following the same path that led to this L/F situation.

John Butch Murtagh from Oak Park, Illinois  

Posted: October 24th, 2013 11:58 PM

FYI - What taxes?

To Briggett from From FYI  

Posted: October 24th, 2013 11:36 PM

The land is in foreclosure . The Village has first claim ... taxes. This deal is dirty.

Bridgett from Oak Park  

Posted: October 24th, 2013 6:59 PM

If they didn't grant the extension, then what? It's not like the Village could take those parcels, and sell it to someone else for development. The Village does not own that land.

Bridgett from Oak Park  

Posted: October 24th, 2013 6:57 PM

The piece that is new here, and a significant piece, is the involvement of Golub & Company. If it were not for their involvement, I'm not so sure the Board would have voted unanimously to grant the extension.

Q from Oak Park  

Posted: October 24th, 2013 6:27 PM

The village does not have the business experience but they have your money to spend and that is what keeps this going. This project from the start was not going to happen because a hotel is not needed in Oak Park. The parking deal from the board was given because they liked the idea of having a hotel, which has nothing to do with making good business decisions. If a private business loses on property, that is part of business. They are not a charitable business.

dystOPia from OP  

Posted: October 24th, 2013 6:24 PM

3) At the board meeting, Michael Glazier was referred to as a Senior VP in the employ of Golub & Co. He is also the original and current signatory principle and contact rep for Lake Street Investors in the Redevelopment Agreement (RDA) with the Village of Oak Park. At the board meeting, the approved extension to the RDA was with Lake Street Investors, not Golub. If Glazier is now employed by Golub, who is representing Lake Street Investors as part of the extended RDA?

dystOPia from OP  

Posted: October 24th, 2013 6:21 PM

2) One of the two reasons provided by Loretta Daly for the village staff recommendation of an 8 month extension was that Lake Street Investors demonstrated "real work" by completing about 85% of contruction documents. Ms. Daly did not include the fact the original architect (A. Epstein & Sons) contracted by the developer for these construction documents placed a mechanics lien on the property against the developer for unpaid services during 2009-10 in the amount of $106,843.

dystOPia from OP  

Posted: October 24th, 2013 6:17 PM

1) The board agenda stated "The proposed request effectively delays the completion of construction by 8 months, and as a result, there is a potential loss of (tax) increment of estimated $1.375M, based upon the 2011 Village staff estimates ... ." Since the developer was only offering $200K (later increased to $250K) to compensate for this loss, Trustee Barber asked staffer Loretta Daly for the village est. loss, to which she responded about $500K. Why did she not refer to the $1.375M amount?

dystOPia from OP  

Posted: October 24th, 2013 6:16 PM

I applaud the tone, expediency and facilitation by Pres. Abu-Taleb during the board meeting, knowing that David Pope would have dominated over any such meeting by lecturing well into the wee hours. That being said, there were a few items that required closer consideration.

Developers are Listening  

Posted: October 24th, 2013 4:32 PM

I disagree with the rationale expressed by Ray Johnson that not approving the extension would send a bad message to developers. Instead, the bad message to developers is coming from the lack of business sense, vision, or authority that the village has shown throughout this process. To paraphrase Groucho Marx, we should be very skeptical about doing business with anyone willing to do business with us.

John Butch Murtagh from Oak Park, Illinois  

Posted: October 24th, 2013 4:26 PM

Deal-Dys I thought this was a casual chat not an inquisition. I know you don't agree with me on everything and I don't blame you for that.

dystOPia from OP  

Posted: October 24th, 2013 2:25 PM

@JBM ... according to the 2011 D200 Settlement Agreement, all future DTOP TIF revenue is to be distributed to taxing agencies, except for any future TIF revenue generated from the potential development of the 3 Sertus- and 2 Village-owned parcels at Lake St. & Forest Ave., provided that they are used to fund the construction of public improvements (parking garage, etc.) required of the Village under the terms of the pre-existing Lake/Forest Redevelopment Agreement pertaining to such parcels.

The Deal Smells Very Bad from Just let it GO!!!  

Posted: October 24th, 2013 2:24 PM

John, I am not buying expensive for OP. Where is the expense for OP? Opportunity cost? PLEASE! I will take the chance. This deal is dirty. Real dirty. It can only get worse! We need to get a fresh start. This has law suit writted all over it. THE BOARD WILL CAVE. We need to get out.

John Butch Murtagh from Oak Park, Illinois  

Posted: October 24th, 2013 1:22 PM

Deal and Dys - Sertus is not a TIF deal. Sertus bought the property and the building cost will be on the back of the investors that have taken over the project. They have three months to prove they have the money and eight months to break ground. The only money that comes from the taxpayers is part of the cost of the garage which will be shared by both the owner of the property and the village. I have hated this project from the outset, but it has more taxpaying proponent than taxpaying opponents and strong board support. Starting over is an option but it would be expensive one. I feel like I am sitting on a track waiting for a train!

The Deal Smells Bad from Just let it GO!!!  

Posted: October 24th, 2013 11:45 AM

I totally agree with dystOPia. The Village Board is not acting in the best interest of the taxpayers by trying to save a ship that sank three years ago. Any deal cut is suspect. How does this ARRANGEMENT benefit the citizens. This is not about the Village Board and some new Developer trying to profit from favour offered five years ago. This deal is dead. Start over and move on ... OR ... be ready to move out of town like eeveryone that was connected to Whiteco. Set us free PLEASE!

dystOPia from OP  

Posted: October 24th, 2013 9:48 AM

@JBM ... yes, certainly a mess, but what kind of mess? Sertus paid $9M for their property in early 2006, a gross overpayment. To compensate, Sertus is reliant on a huge financial subsidy from the village. It cannot extract itself from the project, because of the huge financial loss due to any property sale, which would be much less than $9M. Sertus has no other option but to continue ahead, while keeping the village stalled by convincing them they are on the brink of financial commitments.

dystOPia from OP  

Posted: October 24th, 2013 9:48 AM

The village continues with this game, because they are incorrectly convinced they have no other options but to stick with Sertus. Based on this mindset, the project could remain in limbo infinitum, limited only by the fact the DTOP TIF District, along with the necessary TIF funds for this project, expires in 2018. Therefore, do the deadlines even matter if the board does not have a Plan B in place? The parking garage continues to deteriorate and TIF funds are closer to expiring. What is Plan B?

John Butch Murtagh from Oak Park, Illinois  

Posted: October 23rd, 2013 11:53 PM

IGNORE NEXT POST - my finger slipped. Dys - Of course, you are right about the past passion for the Sertus Building. I might be overly optimistic but I think that three years on the board has added a lot of knowledge and insight for Salzman and Tucker and the additional of Anan and Barber is a big plus. That said, we are in the same boat as the developer and village. I was never a Sertus proponent and still have a Whiteco hangover that I am not convinced can't happen again. That is; can we fill the it with enough residents to get an ROI? But denying an extension will not help since there is not a ready replacement project for the site. Damn this is a mess!

John Butch Murtagh from Oak Park, Illinois  

Posted: October 23rd, 2013 11:40 PM

Dys - Of course, you are right about the past passion for the Sertus Building. I might be overly optimistic but I think that three years on the board has added a lot of knowledge and insight for

dystOPia from OP  

Posted: October 23rd, 2013 7:39 PM

Where I disagree with JBM is where he states "the board needs a chance to work its way out of the mess that the previous board left." Trustees Johnson and Lueck are previous board members who strongly supported this project from the start. Trustees Tucker, Salzman and Brewer are not newbies, and have been supporting this project since their start a few years ago. The problem that led to this Catch-22 scenario is a horribly scripted process and RDA, which has no viable options or exit plan.

dystOPia from OP  

Posted: October 23rd, 2013 7:29 PM

I agree with JBM in that both the board and Sertus are trapped in a Catch-22 of their own devise. Trustees Salzman, Tucker, & Barber made excellent comments concerning lack of financing, credibility, and forthrightness from Michael Glazier, and then in the end, approved an extension to Glazier with none of their concerns remedied. This was exemplified by Tucker who said he cringed every time he heard the words "financing is in progress", which then repeated by Mr. Newman of Golub again and again

Suzette from Oak Park IL (Forest and Lake)  

Posted: October 23rd, 2013 5:55 PM

I started to comment but found that I could not think of a single constructive comment to this issue.

Paul  

Posted: October 23rd, 2013 3:41 PM

Small thing: what you want is "path of least resistance." Very nice writing and reporting. I like how in-depth your articles have been lately, and on some very complicated subjects, too.

John Butch Murtagh from Oak Park, Illinois  

Posted: October 23rd, 2013 11:25 AM

Done, I agree with you but more importantly the board seemed to be expressing the same viewpoint. After hearing the debate on Monday, I think both the developer and the village are trapped. The developer is stuck with a piece of land that they overpaid for and lost value in the recession. The village needs to get some cash flow from the property and quickly. Restarting the project with another developer would have delayed the project a lot. Both sides are jammed up so maybe that will force some action. Can't say I am pleased with the outcome, but I think the board needs a chance to work it way out of the mess that the previous board left.

Done from Oak Park  

Posted: October 23rd, 2013 10:55 AM

OK. This is it. This is your last chance on moving forward on this. Really. It is. Really. I'm not kidding this time. This is it. I'm serious. This time.

dystOPia from OP  

Posted: October 23rd, 2013 9:42 AM

Trustee Johnson has always misrepresented the village property aspects of this project. While he is technically correct that the developer owns the property along Lake St., the village is in partnership with the developer for a project that includes the village owned parking garage and the land beneath it. The village is providing this public property to the project at no cost to the developer. The developer- and village-owned properties are coupled together for this public-private development.

Concerned Resident from Oak Park  

Posted: October 23rd, 2013 9:30 AM

I don't know if Ray was misquoted, but the project will be on the parking garage land also. My understanding is that the Village owns that land.

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