November 12, 2008 - Chicago Spire Tower, Chicago IL

Chicago's Spire In Trouble

Major construction on the iconic tower has stopped, as architect Santiago Calatrava seeks $11.3 million from the Irish developer.

Chicago's Spire In Trouble

Santiago Calatrava's planned Chicago Spire has earned its share of nicknames, among them "The Drill Bit" and "The Twizzler." Now it has a new one: "The Lien-ing Tower of Chicago." Crain's Chicago Business coined that phrase after Calatrava in October filed a lien against the Irish developer of the 2,000-foot condominium tower seeking $11.3 million in payment. While major construction on the tower has stopped, the liens keep coming.

In addition to Calatrava's lien, filed through his Lente Festina Ltd. against Shelbourne Development Group Inc., Perkins+Will, the Spire's architect of record, is seeking nearly $4.85 million from Shelbourne. Meanwhile, New York-based Thornton Tomasetti, whose Chicago office was working with Calatrava on the project's structural engineering, has filed its own lien for $1.3 million.

Kim Metcalfe, a spokeswoman for Shelbourne president Garrett Kelleher, says the liens were anticipated and that the developer is working with Calatrava and the other consultants to resolve the payment issue. Just how much the firms might be paid, however, is a matter of debate. About 30 percent of the tower's 1,200 condominiums are sold, including the penthouse, originally priced at $40 million and snapped up by Beanie Babies magnate Ty Warner.

Since it was unveiled in 2005, the Spire captivated Chicagoans with an audacious design that made the tower appear to twist as it rose, an effect achieved by having each floor rotate slightly over the one below it. Calatrava became the project's public face, disarming opponents by drawing his trademark watercolors on an overhead projector at public hearings. Seeking to create a total work of art, he even designed two model apartments, right down to the custom-designed doorknobs. His aim was to humanize the gargantuan project, which was to have been the tallest building in America and one of the tallest in the world.

Although construction began on the Spire last June, work ground to a halt this fall, leaving a circular hole on the 2.2-acre lakefront site, ringed by caissons that were to have supported the tower's cylindrical concrete core. Kelleher's spokeswoman insists that construction will resume and that the global credit crunch is to blame for the pause. "We're waiting for the banks to start acting like banks again," she says. Some real estate analysts, however, argue that the developer did himself in by starting work without a construction loan that would have carried him through the entire project. In the meantime, the hole, 76 feet deep by 110 feet across, is inspiring commentary of its own. Among the uses dreamed up for it by architecture buffs: an oversized golf hole guaranteed to produce a hole in one.

Original Story - Business Week

Update 12/26/2008

Spire mired in Irish bank crisis - Work halts as lender backing 150-story tower seeks rescue from government

A financial scandal in Ireland is posing new trouble for the developer of the Chicago Spire, the proposed 150-story tower on the lakefront.

Anglo Irish Bank Corp., the developer's main lender, faces nationalization by the Irish government to avoid collapse. The bank's stock has lost 98 percent of its value since reaching a high in 2007, and its chairman quit after investigators discovered he would hidden about $121 million of personal loans he got from the bank.

The bank has specialized in commercial lending and become a symbol of Ireland's boom-and-bust economy. It also had a taste for speculative development overseas. It opened an office in Chicago to handle business here.

For more than a decade, its stock -- now worth just 21 cents a share -- soared on foreign investment and homegrown enthusiasm for construction and property.

Spire developer Garrett Kelleher, executive chairman of Shelbourne Development Ltd., used private funding assurances from Anglo Irish to persuade Mayor Daley's administration to grant zoning approval for the project in 2007. Kelleher had said Anglo Irish's com- mitment was almost open-ended and required no threshold of condominium sales before it would underwrite construction.

Property records show Shelbourne has drawn $69.5 million from Anglo Irish for the early stages of construction at 400 N. Lake Shore Drive. But work has been stopped, and Shelbourne has been hit with several liens from contractors -- including one from his own celebrity architect, Santiago Calatrava. Though the building has been marketed almost as a Calatrava artwork, the architect alleges Kelleher owes him $11.34 million.

Sources said Kelleher has been seeking other investors, either in debt or equity positions, to help get construction restarted. But the world's financial crisis has dried up the supply of money looking for speculative investments.

If Kelleher can't raise money from Anglo Irish, it becomes more likely that he will default or lose control of the project. Shelbourne has said that about a third of the spire's 1,200 condos are under contract, but experts wonder if those buyers will be able to close.

Kelleher and a spokeswoman for Shelbourne could not be reached for comment. An Anglo Irish executive in Chicago declined to comment.

The bank's predicament boils down to bad debts and lost reputation, especially after the disclosure of hidden loans to former chairman Sean FitzPatrick, who resigned Dec. 18.

Irish Finance Minister Brian Lenihan said the government would buy about $2.1 billion in new-issue Anglo stock, effectively nationalizing the bank because the government would gain a 75 percent stake. The government-owned shares could not be traded.

The bank's new chairman, Donal O'Connor, announced an extraordinary general meeting Jan. 16 to approve the government intervention -- and urged shareholders in a letter Wednesday to accept the government's terms even though their own stock would be heavily diluted.

"The board recognizes and understands the sense of hurt and disappointment that people feel regarding the bank following recent events," O'Connor wrote. "We apologize unreservedly to our customers, employees, shareholders and all other stakeholders for these events and are determined to restore people's trust and confidence in the bank."

But Anglo's shares have continued to fall this week, as Irish, British and American analysts voiced doubts that the bank has revealed the true extent of its exposure to bad debts, currently estimated at $700 million.

Credit rating agency Standard & Poor's said its officials planned to visit Dublin next month to get a briefing from Anglo directors. The New York agency -- whose ratings influence the interest rates that banks must pay on their borrowings -- said the FitzPatrick scandal "may have a significant impact on Anglo's standing in the marketplace." It expressed "continuing reservations about the long-term viability of Anglo's business model."

Updated Story - Chicago Sun Times

Update Story - March 24, 2009

Chicago Spire developer in talks with AFL-CIO for funding

A deal with the trusts could also mean thousands of union jobs for members

Stalled construction due to lack of funding for the Spire skyscraper project has left a gaping hole 110 feet wide and 76 feet deep at the prominent 400 N. Lake Shore Drive address.

Representatives from AFL-CIO Housing Investment Trusts are meeting with Chicago Spire developer Shelbourne Development Group on Tuesday to advance preliminary discussions that could have the deep-pocketed pension fund help pay for construction of the stalled skyscraper.

Discussions between the trusts and Irish developer Garrett Kelleher began in January, but the talks are in the "embryonic stage," said Tom Villanova, president of the Chicago and Cook County Building Trades Council, which represents 24 trades locally.

"The main thing is jobs," Villanova said. "We can use our own funds to benefit members. The Spire is going to be five years of construction, which is just phenomenal for us. It's thousands of jobs."

An investment by the pension fund would make the project a 100 percent union job.

"Obviously, the idea of pulling the unions together and making this a 'Made in America' project is very positive," said project spokeswoman Kim Metcalfe, who confirmed ongoing discussions with the union.

"We're exploring all of the financial options with the economy as challenging as it is, but clearly this is long-term," Metcalfe said. "We're working toward the success of the building. We continue to actively market the building. Clearly, the construction of the building is on pause, but nothing else about the building has stopped."

The break in construction has left a hole 110 feet wide and 76 feet deep at 400 N. Lake Shore Drive, making the Spire a worldwide symbol of the recession and shut-down credit markets. It has had numerous liens filed against it as consultants and contractors involved in the initial work sought payment for their services. Architect Santiago Calatrava, who designed the twisting building, filed liens against the project in October for more than $11 million.

The union has three investment trusts, including the Building Investment Trust, a pooled real estate fund with more than $2.5 billion in assets as of Dec. 31. It was created in 1988 as a vehicle to provide competitive risk-adjusted returns for its participants, as well as a way to create jobs in commercial real estate projects for its members.

The Chicago market has proved to be the biggest beneficiary of the fund, with more than $1 billion invested in local projects, including senior and affordable housing and Trump International Hotel & Tower, Villanova said.

The trust, Villanova added, also is interested in investing in the construction of an Olympic village, should Chicago win the 2016 Games.

Update Story - Chicago Tribune