Shelbourn Development scales back its Chicago Spire sales center.

Not too exciting or surprising news coming from Chicago Breaking News but at least Shelbourne’s doing the smart thing by downsizing their sales center operation to the Shelbourne Development offices at 111 S. Wacker Drive.  During the Spire’s peak in sales, their lease took up the entire 18th floor at NBC tower but for the past nine months, we have seen some legal drama going on when NBC Tower sued Shelbourne in order to evict them from the building.  I’m really curious to find out if anyone is buying in the building still.

Chicago Spire developer scales back on sales office

Published on May 17, 2010 9:52 AM | Submit a comment

The developer behind the Chicago Spire closed its posh sales office over the weekend, relocating the marketing arm for the long-stalled project to a much less grand office space nearby.

Shelbourne Development Group, which has been battling the owner of the NBC Tower for nine months, consolidated the sales function into its own office space at 111 S. Wacker. A spokeswoman for Spire developer Garrett Kelleher denied that the move signaled that the project was dead.

“He’s being smart,” the spokeswoman said. “If you’re in a situation where things are slowing down, you need to consolidate and you need to be smart. Clearly the economy has been tough and he’s had to focus on areas of his portfolio that are doing well.”

The sales office in the NBC building, which occupied the entire 18th floor, opened in early 2008 and included touches designed by Spire architect Santiago Calatrava and a built-out model of a Spire condominium.

The owner of the NBC Tower sued Shelbourne to evict the developer last August, charging that the company had not made a rent payment since April. In March, the case was dismissed by agreement, and a $55,082.06 judgment for NBC Tower was voided.

Instead of touring a model unit, potential buyers will see samples of materials and three-dimensional computer models, the spokeswoman said.

The sales office’s closing is likely to cast more doubt on whether the twisting, 2,000-foot-tall skyscraper will ever rise from the circular hole in the ground that now exists alongside 400 N. Lake Shore Drive. Shelbourne has been beset by financial problems since starting the skyline-defining project just as the financial and real estate markets were seizing up.

Shelbourne and Kelleher remain in litigation with Bank of America Corp., which filed suit last August, charging the developer with defaulting on a loan and said it was due $4.9 million. Bank of America said Kelleher personally guaranteed the loan. Kelleher and his company fired back in a countersuit, claiming the lender committed fraud and deception in arranging a loan used to start the building…

Check out the full article by clicking HERE!

Big losses for those involved with The Chicago Spire…no surprises here.

Spire affiliate reports big loss linked to stalled tower

By Eddie Baeb and Thomas A. Corfman, Feb. 03, 2010

(Crain’s) — A Dublin-based affiliate of Chicago Spire developer Garrett Kelleher reported a $207.6-million annual loss, much of which is attributed to the stalled Spire project.

Clarinabbey Ltd. says in an annual financial report filed last week in Ireland that the company took a loss provision against loans made to other companies led by Mr. Kelleher – including one that’s been a major financing vehicle for the Spire. Clarinabbey says the provision stems from “uncertainty associated with the recoverability of amounts owed by group companies.”

Financial results were reported in Euros and converted to U.S. dollars.

The Spire project, a twisting, 1,194-unit condominium tower at 400 N. Lake Shore Drive that would have been the tallest building in the United States, may account for at least $135 million of the $197.7-million loss provision, based on a previous filing by Shelbourne Finance Ltd., which is the entity pegged to the provision in Clarinabbey’s filing.

Shelbourne Finance has previously said the firm provided an interest-free loan of $38.2 million to a Spire-related entity and separately advanced the project $96.8 million, according to its 2008 annual report, the most recent available.

Clarinabbey, whose majority owner is Mr. Kelleher, reported last week that it is “technically in breach” on loan-to-value and interest-coverage covenants with its lenders, a group that includes the now-nationalized Anglo Irish Bank Corp., along with Royal Bank of Scotland Plc and Bank of Scotland (Ireland) Ltd.

Clarinabbey says it’s working to negotiate a standstill agreement with the banks or a restructuring of its loans, but that “there exists a fundamental uncertainty over the company’s ability to meet its obligations as and when they fall due.”

The financial reports were filed with the Companies Registration Office in Ireland.

Calls to spokeswomen for Shelbourne and a voicemail left at the firm’s Chicago office on Wacker Drive weren’t returned.

Clarinabbey reported the $207.6-million loss for the period ended March 31, 2009.

Wow.  To read the full ChicagoRealEstateDaily.com article, click HERE!

Photo courtesy of Tropolism.com

Union funds meant to finance The Chicago Spire construction now kaput.

From this week’s In Other News

Chicago Spire twists in wind as union funds pass on bailout loan

By: Eddie Baeb December 21, 2009

Officials at four big investment funds affiliated with labor unions say they’re not interested in rescuing the stalled Chicago Spire project.

Recent reports that Spire developer Garrett Kelleher and union officials are discussing a possible loan rekindled hope that work would resume on the twisting tower, which at 150 stories would be North America’s tallest building.

But two union funds identified by a local labor leader and a Spire spokeswoman as having expressed interest, the AFL-CIO Building Investment Trust and the union-backed life insurer ULLICO Inc., are taking a pass, according to top executives there. Representatives of two others, the AFL-CIO Housing Investment Trust and the Multi-Employer Property Trust, say the Spire isn’t a suitable investment for them.

“It’s not something we’re able to do,” says Edward Smith, president of ULLICO. “Unfortunately, these are just very difficult markets.”

Another union fund or group of funds still could step forward with a loan for the project. Mr. Kelleher also could secure funding from other sources. But the lack of interest from the four big funds narrows the Irish developer’s options as he seeks a financial lifeline for the Spire.

They’re among the largest funds of their kind, controlling about $13 billion in union pension funds and other assets. They also have a history of commercial real estate investing here and around the country, and an interest in backing projects that create jobs for union workers.

Worries about the prospects of the Spire in a moribund real estate market appear to have trumped their desire to help put union members back to work. The funds are no more eager than other real estate investors to risk money on a highly speculative project in the worst downturn in recent memory.

Mr. Kelleher seeks about $170 million in short-term financing to pay off existing debt and move the project forward. It would be a particularly risky loan because the most likely source of funds for repayment would be a construction loan for the $1-billion-plus project. Construction lenders typically advance funds only after a developer sells 50% of the units in a condominium project. After two years of worldwide marketing efforts, Mr. Kelleher has sold about 30% of the Spire’s 1,194 units.

In essence, Mr. Kelleher is asking the union funds to bet on his ability to sell condos in a stagnant downtown housing market, where mortgage and construction financing is hard to come by.

Michael Arnold, head of investor relations for the AFL-CIO Building Investment Trust, says his fund can’t take that risk. “We would obviously like to be helpful,” he says. “We understand the interest, but we’re not any different than other real estate lenders today.”

Thomas Villanova, president of the Chicago & Cook County Building & Construction Trades Council, hopes union fund managers will consider not only financial risk but also the job-creating benefits of the project.

“This just can’t be looked at in a straight investment-type view. You’ve got to add into the equation this would be 7.5 million man-hours for my members,” Mr. Villanova says. “I don’t think we’ve ever seen times as bad as they are now.”

Mr. Villanova organized a meeting in the spring between Mr. Kelleher’s company, Shelbourne Development Group Inc., and representatives of the 24 local unions that comprise his group. He says some local union officials met with Shelbourne again, but he can’t recall which ones.

More recently, Mr. Villanova arranged a meeting on Nov. 30 between Shelbourne and Mark Ayers, a Washington, D.C.-based union leader who’s a board member with ULLICO and the AFL-CIO Housing Investment Trust. Mr. Ayers didn’t return calls….

Check out the full Crain’s Chicago Business article by clicking HERE!

Photo courtesy of Crain’s Chicago Business