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Bank of America and a group of lenders are moving to foreclose on the retail and transit portion of the mixed-use development, claiming Chicago developer Joseph Freed and Associates LLC has, in essence, run out of money, according to a lawsuit filed Monday in Cook County Circuit Court.Imagine what could have been done if all the energy, resources and arm-twisting by City Hall had been devoted to keeping the current system viable instead of a big dream hole in the ground. Daley's defenders used to claim the loop was the lynchpin which anchored the whole city, now it seems more like they gravity well into which all money flows.
Freed issued a statement Tuesday calling the banks' lawsuit a "misguided action that could halt the project" and make it "near-impossible to restart."
The clash marks a significant setback for the revitalization of shopping along State Street. It also signals that the long-anticipated commercial real estate bubble is beginning to pop as banks are forced to revalue big commercial properties.
"It's probably the tip of the iceberg of banks taking properties back," said Ross Glickman, chairman and chief executive of Chicago-based Urban Retail Properties, who was involved in the Block 37 project in the 1990s.
The banks have been negotiating with Freed since March, when the developer technically defaulted, the lawsuit said. Since then, cost overruns had reached "at least" $34 million as of Aug. 25, court documents said. Freed owes $128.5 million on a $205 million construction loan, the filing stated.
Bank of America is asking the court to appoint a receiver to manage the property and get the construction completed. The office portion, developed by Golub & Co., already has opened.
Commercial real estate values have fallen, on average, 40 percent since the middle of 2007, leaving hundreds of billions of dollars of commercial real estate deals underwater, said Jim Sullivan, managing director of Green Street Advisors, a real estate research firm. New developments are particularly vulnerable because they aren't generating enough cash flow to cover payments on loans, he said.
"For banks, the issue is, 'How do we minimize the loss?' " Sullivan said. "Typically the way to do that is to get control of the property, re-price it, sell it and move on."
Has anyone experienced this?
A while ago I was riding the Red line, no one realized that the electrical lights weren't working in our car until we reached the subway.
Not only that, but a cubs game finished so the car was packed.
It was a creepy experience. I boarded before Addison and I was packed in the dark behind 3 fat cubs fans and someone's kid. The way the subway lights flickered the car looked like a horror film. I'm amazed that I was able to leave on my stop without injury. :(










