Seven years ago, the planned Chicago Spire was touted nationally as an architectural game changer in the city's skyline. In more recent years, the large hole in the ground that was to be the beginning of the tallest building in the Western Hemisphere has symbolized the financial meltdown that roiled the housing market.
Now the project has regained a sliver of hope. The Irish developer said it has found an investor to pay off creditors, which would allow the company to emerge from bankruptcy and potentially restart work at the long-dormant site. Still, it is a baby step in what would be a long road to the project's fruition.
In a filing with U.S. Bankruptcy Court on Thursday, Shelbourne North Water Street LP, the firm headed by Irish developer Garrett Kelleher, is seeking court approval to move forward with an investment of up to $135 million from Atlas Apartment Holdings LLC, a Northbrook-based apartment development and management company.
While Shelbourne said the funds would enable it to pay bona fide bankruptcy claims in full, there is no detail in the court documents about the additional funds needed to construct the twisting, 2,000-foot tower designed by Santiago Calatrava, a project once estimated to cost at least $1.5 billion. The 1,194-unit condo building captured people's fascination but couldn't get construction financing.
Kelleher was not available for comment, according to his attorney, Thomas Murphy.
"Given the ongoing recovery in the Chicago property market, the timing is better now than when this project commenced," Kelleher said in a written statement. "I am delighted to have found a partner who believes in the project as passionately as I do."
Steven Ivankovich, Atlas' chief executive, said he was introduced by his bankers at Credit Suisse to Kelleher and took an interest in the project because of his local roots and Kelleher's vision. Atlas would be the majority partner in the joint venture, he said.
"I'm a Chicago guy," Ivankovich said. "I want to see Chicago regain its architectural crown. It's the greatest piece of development land I've ever seen."
The Spire site, at 400 N. Lake Shore Drive, has been dormant since 2008, went into foreclosure in 2010 and is in a protracted legal battle in several court systems. What remains is a 76-by-110-foot hole.
Last summer, Related Midwest, whose Chicago properties include luxury rental buildings at 500 N. Lake Shore Drive and the soon-to-open 111 W. Wacker, as well as condos in the South Loop, bought at a discount $93 million of delinquent debt and penalties tied to the project from National Asset Management Agency in Ireland. In November, an affiliate of Related filed a federal lawsuit against Kelleher seeking more than $95 million in guarantees he made as part of the project.
Also, in October, an involuntary bankruptcy petition was filed against Shelbourne by Related and other creditors. Shelbourne was given the exclusive right until March 10 to propose a reorganization plan to the court.
Under the proposed investment agreement filed with the court, Shelbourne would try to have a reorganization plan confirmed by Aug. 31. In addition to paying all claims, that plan could involve the transfer of some or all of the property to Atlas, according to the filing.
Atlas would be entitled to a break-up fee of about $4 million plus up to $750,000 in expenses if Shelbourne does not have a reorganization plan confirmed by the court by Aug. 31 and have it take effect by Oct. 31, among other conditions.
Since the housing market's downfall, apartment high-rise construction has taken off in downtown Chicago, but lenders have been more reluctant to finance condominium projects.
Kelleher put $188 million of his own money into the project. An unpaid loan, which is now owned by Related, was used to purchase the land, Murphy said.
"From the day we broke ground, we were looking for construction financing and we were still in touch with those lenders," he said.
Before the project faltered, one-third of the units, which started at more than $700,000 and went up to $40 million, were pre-sold, according to Michael Golden, co-founder of @properties, the Spire's exclusive local marketing agent. About half of the buyers who signed contracts were from outside the United States.
Beanie Babies creator and billionaire Ty Warner, recently sentenced to probation for tax evasion, became the highest-profile buyer in the project, signing a contract in 2008 for a duplex penthouse unit that was listed for $40 million.
"Obviously, there was demand for what we were selling there," Golden said. The luxury market "wants big, well-designed space, and they'll pay. There's a definite hole in the marketplace right now for luxury product."
A spokeswoman for Related declined to comment.
Atlas' portfolio includes 75,000 apartment units nationwide and projects in Great Britain. Most of its U.S. investment is in the Southwest and Southeast.