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| | The May Report: 8/11/2010: What the TIF happened? When the international real estate market was slumping, Steve Levin managed to sell off a property supposedly dedicated to tech firms at a sweet premium price -- and what really happened to the original $8MM TIF money anyway? Are we looking at the ghost of Weinstein's past?
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| | August 11, 2010
The May Report: 8/11/2010: What the TIF happened? When the international real estate market was slumping, Steve Levin managed to sell off a property supposedly dedicated to tech firms at a sweet premium price -- and what really happened to the original $8MM TIF money anyway? Are we looking at the ghost of Weinstein's past?
Editor and publisher: ron@themayreport.com, ronaldmay@aol.com, www.themayreport.com , 773-525-3944.
If you missed an article, go here: http://www.tmronline.com/A55951/tmrarticles.nsf/vwFullNewsletter
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TABLE OF CONTENTS
The Scoop section:
-- The story of the 247 S. State Street TIF, by Ron May [with heavy contributions from TRB and Steve Levin]
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The Scoop section:
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The story of the 247 S. State Street TIF, by Ron May [with heavy contributions from TRB and Steve Levin]
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LET'S START WITH THE BIG PICTURE AND THE LESSONS LEARNED
This article has been six months in the making. The research and factual information was dug up by a person we will call TRB.
The biggest problem I face in any story or investigation is whether at the end of the day, is there a story here and if so, what is it? Does is pass what I would call the 'So what?' test? Or stated somewhat more diplomatically, "And you are telling me this because ________________?"
And if you get past that, there is one other crucial hurdle that must be overcome: What does that mean?
Such is the dilemma with a story that is now six months in the making as a story and the underlying events date back to 1999.
One key component in putting a story like this together is ending it with "Lessons learned." What does this story tell us about how we should be doing things?
And that is when I realized that there are not really many, if any, economic development experts left in this town. With folks like Thortnon and Weinstein gone, who is left to articulate the big picture? Whom can I talk to who is knowledgeable about the process, who will speak candidly and on the record?
Give me someone and I will call him or her.
There is a lot of talk these days about incubators and just about everything is now classified as an incubator. A recent meeting at IIT on July 29th discussed various incubators. Nik Rokop, Geoff Domaracki, Fred Hoch and others. But what appears to be missing in all this discussion is the role of government assistance, if any. Remember the Mayor's Council of Economic Advisors?
Where are the city fathers in all of this? Do they even still exist?
At the end of the day, do all incubators come down to real estate deals?
As we debate the current issues, it might be a good idea to know what actually happened in the past. We all remember the failed Goose Island TIF. And recall all the maneuverings of David Weinstein who managed to get a $24MM TIF for marchFIRST which was never executed but it did result in Weinstein getting a CEO job to run a firm with $30MM in venture funding named Blue Meteor -- a company that like many of the time flamed out.
One TIF focused on technology was for the 247 S. State Building, formerly the Lytton Building.
It makes an interesting case study because it was not a complete failure nor was it a smashing success. And the developer involved, Steve Levin of Brijus Properties, stuck with the work through the time the building was sold.
After all the back and forth in the article that follows, I am still scratching my head.
What are the lessons here?
-- The city of Chicago did a poor job in monitoring and controlling the process.
-- The developer did not do a good job in attracting tech firms and in marketing
-- The developer dropped the ball in filing reports on leasing, marketing and construction.
-- Steve Levin was picked for political reasons and was never suited temperamentally or in terms of business practices for the job of running the RDA or TIF.
-- Market conditions changed and with the best of intentions, the building could not sustain itself as a tech hub. The loss of Andersen as a tenant and the failure to secure an anchor tenant played a role.
-- The whole thing was a sweetheart deal since, in rough numbers, Levin got $8MM, bought the building for $9MM (numbers in dispute) and sold it for $35MM to a non-profit organization that is not [there may be some dispute on this] paying tax revenues to the city.
-- Make sure that technology entrepreneurs and not real estate developers are in charge of any TIF deal in that they will ensure occupancy of the building(s) by tech entrepreneurs.
-- Reform the business processes of the city so that a certificate of completion is not signed without the RDA (Redevelopment Agreement) having been complied with
-- Make sure that those involved in monitoring, watchdog functions and general governance at the city understand and are willing to use claw-back provisions in the agreements.
-- There is no particular lesson here. The RDA was issued under tough conditions and at the end of the day, it worked out as well as it could have for the tenants, the developer and the city.
Corruption -- if we can use that word -- in the handling of TIFs is not exclusive to the city of Chicago. I don't mean bags with cash, bribes or kickbacks. By corruption, I mean things that distort the original intent of the effort and the intervention of agendas that do not belong there.
Many of you know about the fiasco at DuPage Airport which is another story well worth investigating and that was a cauldron of political intrigue tied into the Denny Hastert (former speaker of the U. S. House of Representatives) machine. Politicizing a project is a form of corruption.
This story would not have been possible were it not for the efforts of TRB who shall remain, for the time being, anonymous. We need many more "citizen" reporters like him. He may have had his own agenda at the start, but as he got into it, he realized that this is not about individuals and whether Steve Levin is a good or bad guy, but rather about the whole system and process.
His professed motivation at the end is making the system work more effectively.
I have seen the emails or at least many of them between TRB and city officials and it is still not clear to me how much of a run-around he got.
I spoke to Steve Levin at 10:20am Wednesday morning (today, August 11th -- and happy 48th birthday tomorrow to my brother David who works for CA). I asked him if there were synergies between the firms and he said that there was some, and that part of one floor was cordoned off for smaller start-up firms. He said that his idea of a true incubator is the Evanston incubator, and the 247 S. State building was never intended to be that. The relevant RDA started ni the summer of 1999 and ended in 2008 when the building was sold to DePaul University.
Steve plainly acknowledges that he is a real estate guy, not a technology guy. And as a real estate guy, he can't be doing too badly since he paid for his kids to go to Yale and Penn.
For an incubator to work, he said, you probably have to have technology people behind it.
He also said that there was some push back on the other end. Some of the bigger firms were afraid that the small firms would steal their people away. That accounted for some reluctance on the part of larger tenants to come in.That statement was deja vu all over again. That was precisely the argument that Ed Grant ran into when he was trying to start up incubators in the loop district back in 1988-1992. So, by 1999, things had not changed all that much.
The ePort space and the old Montgomery Ward Building are TIFs, Steve said, and we gather they have been successful, but TRB offers some cautionary notes.
"By all accounts 600 West Jackson has been an incredible success from an economic-subsidy/TIF perspective and a technology development perspective. However, 600 West Chicago's enormous floor plates do not cater to smaller technology companies, and 600 West Chicago is clearly not located within the City's Central Business District - its steps from Cabrini Green and Kendall College.
Chicago's Central Business District still profoundly lacks a technology-based real estate concept(s) that caters to start-ups, emerging technology companies (internet, mobile, life sciences, energy technologies, hardware/equipment, et al) and growing companies. 600 West Chicago is Exhibit A in the effective use of a TIF for temporary construction jobs and meaningful, good-paying permanent job creation by way of emerging technology companies - Groupon, ECHO, JUMP Trading, ThinkorSwim, et al."
Levin cautions that the use of incubator is much too loose. The purpose of the 247 S. State Building was to be a "HUB" for tech firms, but in the formal sense incubator was not part of the plan.
My own view is that such caution should be used in other circumstances. The so-called Clubhouse known as Tech Nexus is a space for tech firms to interact, but is it an incubator?
Nik Rokop readily admits that a tech park is not a tech incubator but the two can co-exist in the same space.
What we really have now are clusters or tech parks. Incubators are costly because you have to have staff dedicated to it like a Jim Curry or a Tim Lavengood.
I asked Steve Levin if there is anything he would do differently if he had it to do over again and he said there was nothing. But implicitly, he did say there was something when he told me "I'm a real estate guy, not a technology guy." Essentially he said that he played the best hand with the cards he was dealt.
Steve also has no idea if there is even a Mayor's Council anymore. It seems that when it comes to Economic Development theorists and thought leaders there is a paucity of talent to consult.
Much of the energy has been shifted to broadband and people like Dan Lyne, Charles Benton, Bruce Montgomery are more interested in that than more buildings.
From an economic efficiency point of view and economies of scale, much of the housing has been shifted to universities or tech parks. Doing a complete build-out is no longer in fashion.
The corridor around Ravenswood has organically evolved as a tech hub of sorts.
But we can't cover every topic in one teeny weeny article so let's get started. One function of this report has been to chronicle the history of the technology industry in Chicago.
TRB's final comments direct us to comparables to judge the 247 S. State TIF:
He writes: "Special Reward for Failure or Sandbagging for DePaul? --- A substantial vacant and distressed 247 South State was sold at an "premium-price" to one of presumably less than a handful of buyers (DePaul) that would pay a "premium" for a 1/2 empty building.
$35M/300,000SF = $116/SF Sale Price.
By way of comparison, 221 North LaSalle Street - an older office building with incredible river views sold for $53M/460,000 = $115/SF in August 2006. Please note that not only is 221 North LaSalle a more desirable location, architectural design (221's Art-Deco vs. 247 S State Terra Cotta) and amenities (221 has an indoor parking garage), but most importantly ---- 221 North LaSalle was over 90% occupied when it sold in August 2006."
TRB also warns me not to confuse execution with compliance.
"Ron.....please do not confuse 'executing the RDA' with 'non-compliance' of the RDA.
Levin clearly executed an RDA. Otherwise TIF funds would never have been released.
To date, my position has been that Levin was 'non-compliant' with several portions of the RDA he executed. While 'non-compliance' vs. 'execution of RDA' are semantics....they are very important semantics in the context of maintaining credibility with your readers in the matter."
May again. So, when you see references to execution and compliance keep that distinction in mind.
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Set your clocks back to 1999
Set your mental clock back to August 1999. Right from the start, Steve Levin's announcement that he had just purchased the 247 South State building struck a tone combining bewilderment and anxious anticipation to get the show on the road. He wrote the following to TMR:
+++++++++++++++++++
Subj: Re: The May Report: 8/12/99: Tolmie of YM claims that MyPoints is notin the 5...
Date: 8/13/1999 10:26:06 AM Central Daylight Time
From: HYPERLINK "http://us.mc539.mail.yahoo.com/mc/compose?to=SLevin23@aol.com" \t "_blank" SLevin23@aol.com
To: HYPERLINK "http://us.mc539.mail.yahoo.com/mc/compose?to=RONALDMAY@aol.com" \t "_blank" RONALDMAY@aol.com
Ron,
As of today, we are the proud owners of the 247 S. State Building, a/k/a The Hub Building (original name of the building), a/k/a Chicago Information Technology Exchange ("CITe"), formerly known as f/k/a Lytton Building, f/k/a 14 E. Jackson. I am leaning towards the "HUB", what do you and your readers think. As you know, this transaction was complex and at times very frustrating. Although I am "politically unsophisticated" according to one reporter, I am told 6 months for a deal of this magnitude is the equivalent of warp speed.
Now the real work begins. We start construction at the end of this month. I appreciate the IT community's patience with getting this project started. It is now a reality!
Steven Levin
+++++++++++++++++++++
On top of all the set-backs with construction and delays and difficulties getting leases signed, Levin got hit by a fire.
Even with that, Levin did not back down in the face of criticism.
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Steven Levin: Refutes safety violation allegations at The Hub
Date: Mon, 29 Oct 2001 13:55:47 -0600
From: "Steven Levin"
To: ron@themayreport.com
Dear Ron,
The comments made in your 10-26 report regarding the Hub's fire and safety systems are highly inaccurate. The following are the TRUE facts which you can easily confirm.
1. Over 75% of the building is now either sprinkled or has some fire protection. We have agreed with the city of Chicago to sprinkler all the remaining spaces as floors turn over.
2. The tenant who wrote this note made a decision to occupy existing conditions space in the "un-renovated" portion of the building to save money. They were fully aware that the space was not sprinkled when they moved in. Based on a recent meeting with this tenant, we have secured pricing for installing horn/strobes in their space and hooking up to the building's fire panel system. This type of work would normally be at the tenant's expense if it were not part of the original lease. We have also offered to relocate this tenant into brand new space that has sprinklers, alarm and strobes, but they declined.
3. I take exception to the tenant's letter reference to September 11th, and our lack of action. The fact is that we have been very proactive in regard to life safety issues well before September 11th. We have two guards in the building at all times. Prior to our involvement with the building it had no security guards. In addition, we invested a large sum in an automated monitoring and access system. Each employee in the building is given an access card that has their picture and other important data programmed inside. Finally, even though the building was grandfathered, we made the decision to install a comprehensive new life safety system in the Hub.
Sincerely,
Steven Levin
President
Brijus Properties
14 E. Jackson, 8th floor
Chicago, IL 60604
(312) 739-3333 / FAX 739-3338 / Mobile (312) 446-5777
+++++++++++++++++++++++++++++++
There are many old timers who recall and many new people who have no memory of it and some people who were around in some tangential way who need to be clued in. I recall a few shindigs held at the 247 S. State Building with tons of dot com techs present. The space had not been built out yet, but that was part of the appeal.
A guy in his mid 30s, whom I did not know, a life time Chicagoan whom we will call TRB, approached me back in January 2010. We have communicated many times -- by email, phone and in person three or four times. He did all of the hard core research for this article.
As you know, there are many types of TIFs, some in retail, some in manufacturing, some in technology.
Back in the late 1990s, Rich Daley established an office of technology advisors. David Weinstein headed that office for a couple of years and then it was taken over by Katherine Gehl. The office recommended several TIFs that were quite prominent and high profile at the time. One of those high profile TIFs was what was referred to as Goose Island which was to be run by Flip Filipowski and divine interVentures. Another was the marchFIRST TIF for a facility at North Elizabeth Street properties and that was for $24MM, but it was never executed, according to the records TRB found by way of sifting through many documents. There was also another TIF at 1 N. LaSalle.
Many of these TIFs fell under the general rubric of the Central Business District TIF.
The one we will focus on here is the TIF funding for 247 S. State Street. run by Steve Levin under the auspices of Brijus Properties.
First, a few words on the mechanics and logistics of finding this information. The City, like other government bodies, is subject to the FOIA, commonly known as the Freedom of Information Act which allows anyone, news organizations and private citizens alike to gain access to publicly available but unclassified documents.
The way a FOIA works, one files the paperwork with the appropriate department and they have approximately one (1) week to respond to FOIA Request. Then they have a week to copy any papers you may want from the FOIA after you have had a chance to sift through them in their offices. Often there are many papers, even boxes full. In fact, TRB, the guy doing this investigation found some copies of an article written by Ron May in The May Report in one of the boxes. The guy who did the work on this spent many hours rummaging through boxes of papers at the city, mostly the DPD. It was not easy and he got the run around quite a bit. But that could be a separate article.
TIFs can get complicated and since there are so many varieties of them with so many different structures, a reporter has to make TIFs his beat. Ben Joravsky of the Chicago Reader has done just that. www.chicagoreader.com/chicago/the-chicago-reader-tif-archive/Content?oid=1180567
City provides taxpayer-funded subsidies (i.e., cuts 7-figure checks) to private industry (i.e., developers, investors, corporations as a way to either "sweeten-the-pot" or to "get-a-proposed-deal-done.") In fact, according to Ben Joravsky -- the Central Loop TIF (or the "Slush Fund" as Joravsky refers to it) -- was the city's oldest TIF -- having spent over $365,000,000. The Central Business District TIF, according to Joravsky, closed out in 2008. It's also my understanding, although not verified, that the 247 S State TIF was funded by way of the Central Loop TIF.
As with any other transaction, there are restrictions and stipulations on what the money can or cannot be used for. In the world of TIFs, this is called an RDA which stands for the Redevelopment Agreement.
Ben Joravsky might take issue with this and he told me he knows no specifics on the TIF or the RDA for 247 S. State Street, but Steve Levin of Brijus Properties who was awarded the 247 S. State TIF (or RDA) says that the money cannot be used for just anything "since all expenses are approved by the City through submitted draws and lien waivers."
Our tenacious and stick to it investigator, TRB, was quick to comment on this when he wrote me that "Frankly, I suppose the restrictions stipulated in the RDA are only as meaningful and effective as City Hall's desire to manage the compliance of RDA's."
So, it does appear that the oversight process is key and the management from the point of view of the city. Was that present in the case of 247 S. State? We shall see.
TRB points out based on his FOIA exercise that "it appears that a developer can also 'contest' select provisions of the RDA. In the case of the 247 S State TIF, to the City’s initial credit, the City initially 'pushed-back' on 247/Levin’s early demands re: scaling-back RDA requirements."
Levin requested 'relief' and was rebuffed by the city
Steve Levin is quick to defend: "We requested relief only after the technology /dot com crash and losing several tenants, including Anderson, Telenisus and Exodus Communications. These tenants alone accounted for over 60,000 sq ft. In addition, we lost several smaller companies."
TRB, no shrinking violet himself, poses the question: Did Andersen actually sign the lease?
My own recollection of this is that Andersen was set to take two floors but at the last minute pulled out and one of the reasons they cited was that they were not comfortable with Mr. Levin and his style of operating.
TRB says that "Steve Levin refers to having 'lost' Andersen as a Tenant. TMR reported that Andersen pulled plug because of dealings with Levin. Also, please keep in mind that Tony Binns - FOIA Officer at CDC (formerly DPD) reported that the only leasing report that Levin submitted was an November 9, 1999 Leasing Report. On this note, Alicia Mazur Berg's reference to Levin's failure to provide adequate leasing information as one of two (2) factors that she refused Levin's October 2001 request to altogether 'crater' and 'scrap' the technology tenant provisions and the technology concept stipulated in executed RDA.
Steve Levin responds that he did not want to dump technology, just add to it. "We never wanted to scrap the technology concept, just get some minor relief because there were no technology firms in the market for space at the time."
TRB says that "Levin wanted specific permission to market and lease the project floors (2-thru-7) to non-IT tenants."
TRB continues to explain his view: "This was NOT minor relief as the TIF was clearly underwritten for an IT concept. To this end, Levin tried to 'crater' and 'scrap' the technology concept a mere 26 months after purchasing 247 S State. To a great extent Levin was successful in these efforts as the 3-floor Everest College deal is clearly not compliant with technology provisions of RDA.
TRB continues: "Bottom-line --- any changes (or relief) to an RDA essentially amounts to a bait-and-switch. On this note, RDA’s should only be changed (or provided) relief after under-going strict scrutiny by City Hall.
In the case of Levin's request to relax restrictions, the City expressed disappointment that Levin was not submitting his RDA-required monthly marketing and leasing reports. Further, there was only (1) leasing report identified in my 247 S State FOIA exercise. Suffice to say --- I was shocked."
May here. This interaction came in 2001.
Here is where we get into some wrangling over facts. Levin says that "We submitted all the reports requested."
Levin also says that "We filed several progress reports." TRB says Levin filed only one leasing report, according to Tony Binns, the FOIA officer.
As distinct from a leasing report, TRB says he "found one (1) report that amounted to a “progress” report, however, even that one (1) report didn't address all specifics as required by RDA’s definition of a progress report. Further, at some point in the early 2000's (after Andersen pulled-out), Levin (and his counsel) petitioned the City to 'relieve' 247 S State of a substantial portion of the RDA requirements related to technology companies. The City refused to provide 'relief' to this requirement. In fact, the basis of their refusal was in large part due to no demonstrated progress being addressed in Progress Reports."
TRB states: "Levin DID NOT submit all the reports as required by the executed RDA.
The only leasing report that the FOIA Officer had a copy of was November 9, 1999.
Pursuant to Section 3.7 of the RDA --- Levin was required to submit Progress
Reports related to Construction AND Leasing efforts. On this note, while the draw
and lien waivers helped enforce the "scope" of the construction project --- the only provision that could essentially "enforce" compliance with the Technology Concept was the Certificate of Completion.
Levin's failure to comply with such a basic provision is shocking as presumably Levin requires the same leasing reports from leasing agents that have worked on the 247 S State project over the years -- Sally Duke (former Brijus employee) and MB Real Estate (formerly Miglin-Beitler). Further, the failure of the City to enforce such an academic and logical provision essentially reinforces the perception that Levin was granted an $8,000,000 gift from the Rich Daley administration to the detriment of the taxpayers, school districts, fire and police pensioners. Since it is a zero-sum game in the context of municipal finance, that same money has been diverted from them. It is also called 'Robbing Peter to pay Paul.' "
Levin's response to this gets interesting. "This is preposterous, we acquired a building that was largely vacant for over 10 years after Lytton’s department vacated. The Building was bringing in little revenue, virtually no jobs, and low real estate taxes. We totally gutted the building, including restoring the façade to historic standards. We leased up the building to over 90% before the technology crash, the tenants created hundreds of new jobs, and real estate taxes increased dramatically, all to the benefit of the City."
May here again. Maybe I can step in with a bit of context. And by the way, in case you're wondering, TRB and Levin were not on the phone or even face to face. I wrote this initially as a Q&A format and called Levin on a cell phone number that was still working after ten years, sent him the document to review and he responded in writing so none of this is subject to errors that might arise from my failure to hear the tape correctly.
The context is that in 1999, the central loop business district was constrained by some very traditional models for renting and leasing. Technology start-ups did not fit in. They grew quickly, they needed space flexibility, they needed variable length leases, they needed build outs. Things that we take for granted today were not commonplace then and in some sense, the 247 S. State TIF was innovative.
TRB is unrelenting on the issue of Everest College: "The TECHNOLOGY PROJECT FLOORS (Floors 2-thru-7) stipulated for TECHNOLOGY Companies. Instead, Levin leased Floors 2, 4 and 5 to Everest College - a school for Massage Therapists and Dental assistants? If the City wanted a brothel concept --- the should have issued an RFP for a Brothel! ! !
The Everest College Issue
Here's a list of Everest College's Programs throughout Chicago ---
Everest College - Burr Ridge
* Dental Assisting
* Massage Therapy
* Medical Administrative Assistant
* Medical Assisting
* Medical Insurance Billing & Coding
Everest College - Chicago
* Dental Assisting
* Massage Therapy
* Medical Administrative Assistant
* Medical Assisting
* Medical Insurance Billing & Coding
* Pharmacy Technician
Everest College - Merrionette Park
* Dental Assisting
* Massage Therapy
* Medical Administrative Assistant
* Medical Assisting
* Medical Insurance Billing & Coding
* Pharmacy Technician
Everest College - North Aurora
* Electrician
* Medical Administrative Assistant
* Medical Assisting
* Medical Insurance Billing & Coding
Everest College - Skokie
* Dental Assisting
* Massage Therapy
* Medical Administrative Assistant
* Medical Assisting
* Medical Insurance Billing & Coding
* Pharmacy Technician
WHERE IS THE TECHNOLOGY COMPONENT OF EVEREST COLLEGE IN THE ABOVE-DEGREE LISTING? CLEARLY, EVEREST COLLEGE IS NOT EVEN REMOTELY THE EQUIVALENT TO FLASHPOINT ACADEMY."
TRB contends that Everest College has nothing to do with technology: "The Everest College deal clearly fell-outside the scope of the RDA."
Steve Levin, predictably, disagrees: "Everest College offered an Information Technology program. In fact another school that specialized in technology training, Westwood College, wanted to lease two floors in the building. However, we were unable to do the deal because Everest had an exclusive use clause in their lease that prohibited other tenants from providing technology training."
TRB: "Everest College does not offer an IT program. Further, to make a representation that an Everest College lease deal is even remotely-compliant with the Redevelopment Agreement is totally 110% preposterous."
TRB told me on the phone Monday morning that the Everest deal is not de minimis (isn't that a big word for a born and bred south side Irish guy? -- can't see Dever using those words, much less knowing them) since it was three floors of the building earmarked to technology that were not used for tech.
Guess what? That one issue can easily be put to rest by a phone call. I made that call about 9:30am Monday morning, August 9th, and the woman who answered (in California) told me that there is no IT program offered by Everest in the Chicagoland area at this time. So on this point at least TRB seems to have facts on his side so where does that put us on the Westwood deal? Remember that at the time in question Everest could have had an IT program.
May again. I have some reluctance to get into the next issue because it may be entirely irrelevant.
The Andersen deal left Steve Levin high and dry but he did get Hubbard One to come in. Is that right? And when was that?
TRB says: "I'm not sure when Hubbard One committed to 247 South State (6th and 7th floors). Hubbard One relocated to One North State after being acquired by Thomson."
I asked him roughly how many of the floors were ever filled up by tech firms?
TRB contends that out of 18 floors in the building, floors 2-thru-7 and basement were supposed dedicated exclusively to technology firms. Below is a stacking of tenant's in the building as of January 2010.
2nd floor - Everest College (non-technology)
3rd floor - 4240 Architecture and DePaul (formerly Corbis - quasi-technology)
4th floor - Everest College (non-technology)
5th floor - Everest College (non-technology)
6th floor - DePaul (formerly HubbardOne space).
7th floor - Emmis Interactive (formerly HubbardOne space).
8th floor - Vacant
9th floor - DePaul and Addus Training
10th floor - DePaul
11th floor - DePaul
12th floor - Cristo Rey and Harborquest
13th floor - Brijus and OneEconomy
14th floor - DePaul
15th floor - DePaul
16th floor - DePaul
17th floor - TimeOut Chicago Magazine
18th floor - DePaul
Steve Levin is not buying it: "January 2010 is totally irrelevant, within two years of completing the renovation, the building was substantially all technology related tenants. Additionally, the Redevelopment Agreement expired December 31, 2007."
I should add that we attempted to find out how much if any tax revenue is being generated by the DePaul property, which I gather is tax exempt, but some revenue might be coming from parts of the building not owned by DePaul. This question is above my paygrade at this time.
I asked TRB what kind of monitoring the city did based on his research.
This would appear to be the crux of the issue. If there is non-compliance or non-performance with an RDA, TRB explains that there can be "claw backs."
TRB says:
"TIFs are supposed to be repaid through increases in property tax revenue (over a period of time).
A TIF or other public economic development subsidies often contain provisions that are generally referred to as 'claw-back' provisions for Developer's non-performance. A claw-back provision takes effect in the event (or circumstance) that a developer does not perform the obligations and requirements of the RDA that governs the TIF proceeds.
Further, before the TIF district building can be sold a certificate of completion must be issued, signed and executed by the City. It is my understanding the Certificate of Completion is the final leverage point with a developer. In the case of 247 South State, the City could have withheld their execution of same Certificate in order to negotiate the repayment of the $8,000,000 TIF as clearly Levin did not comply with material provisions of the RDA."
May again. It would appear that the certificate of completion is at the core of this dispute.
Levin says that "We absolutely complied with the provisions of the TIF and were issued a Certificate of Completion upon final review by the City."
Here is where it gets convoluted. The TIF is not paid back per se unless the RDA is not complied with. Thus, it all comes down to performance on the RDA.
TRB gives his take and that is based on the marketing and leasing reports that Steve Levin did or did not file with the city, based on TRB's FOIA research.
"Levin did not comply with perhaps the most important element of the project --- Levin did not submit the RDA-required and stipulated marketing and leasing reports. Further, the City was complicit in its non-enforcement of this critically important provision.
See above in this article for the relevant provisions in the RDA.
TRB says that he "specifically asked the City if Levin paid back any portion of the TIF as a condition of his closing with DePaul University. The City has refused to answer this rather academic question (no pun intended)."
Levin says that "We absolutely complied with the provisions of the TIF and were issued a Certificate of Completion upon final review by the City."
Levin goes on to say that the issue of DePaul is irrelevant: "As far as I know TIFS are not usually paid back. In addition, the term of the Redevelopment Agreement expired on December, 31, 2007 prior to the sale to DePaul."
Let's recap a bit at this point. We have three questions, really.
1. Did Levin comply with the RDA?
2. Were there any attempts by the city to put some controls and monitoring of the situation?
3. If there was non-compliance with the RDA, then how is it that the city signed off on a certificate of completion with no claw-backs required, etc.?
And underlying all of this is TRB's belief that Levin made out pretty well on the numbers:
TRB contends and Levin disputes the claim that Levin basically bought the building for $9MM when he had an $8MM TIF. TRB argues that this is way outside the accepted ratios for TIF to purchase prices. TRB says that the amount of the TIF should be no more than 20-25% of the total purchase price. "In theory, Mr. Levin's cost-basis on the day of closing was $1.775MM for a 272,223 sf building at the intersection of State and Jackson --- which amounts to $6.50 per SF. Mr. Levin sold the building to DePaul University on June 5, 2008 for $35,000,000 or $128 per square foot!"
Oh, and I almost forgot, the sale of a building for $35MM after a purchase at $9MM seems to stick in the craw of TRB.
Steve Levin challenges TRB's math up and down the line: "The total project costs were $35,495,000 (Acquisition-$12,349,04, Hard Costs-$19,231,000 and Soft Costs-$3,913,996) as outlined in the Redevelopment Agreement. The TIF constituted less than 23% of the Project costs. Your purchase price information is incorrect as stated above and constitutes only one component of the Project costs."
At this point, TRB does not challenge the numbers but he does suggest that "Someone needs to conduct a Forensic Audit of the 247 South State deal."
A BIG BUMP IN THE ROAD: THE ANDERSEN DEAL THAT FELL THROUGH
May again. To fully grasp the dynamics here, we have to cover the whole issue of Andersen pulling out and Levin and TRB don't see eye to eye on that either.
On February 8, 2001, I wrote this in Briefly noted and it is in the files of the city in the DPD.
+++++++++++++++++++++
And on February 8th, 2001, I wrote this in Briefly noted.
"Briefly noted
* I just got a call at 4:38pm from one of the managers at Arthur Andersen, in the Business Consulting Group. He explained to me that the head of their practice, Patrick Dolan, announced to the partners and the managers today that they will not be occupying the space at The Hub (247 S. State) that they were to occupy starting May 1. This is significant for The Hub because Arthur Andersen was expected to be the anchor tenant, taking two full floors of the building.
Pat explained that while the difficulties they were having with the real estate company were part of the reason for the pullout (construction had not yet begun on the second and third floors which they were going to occupy), the real reason for pulling out of this deal is that business is soft. My source explained that it is not business in the BCG per se, but rather in the company overall, that is responsible for this cautious approach. Approximately 75 Andersen people were going to be moving into The Hub. I was also told that Crain's was planning to show up next week to write a piece on this. So, this is the kind of scoop that I love!"
+++++++++++++++++++++++++
May again. Levin says that "Anderson would have been a great tenant but was not an anchor tenant."
TRB questions that: "At 60,000sf - - - Andersen would have occupied at least 4 floors at 247 S State. This is more than 50% of the square footage defined as Project Floors - thus making Andersen an Anchor to the Technology Concept."
I asked: "When the Andersen deal fell apart in February 2001, how much of the building had been built out and rented?"
Levin says that "With Anderson about 90%, without them about 80%."
TRB's response to Levin is that "The building is appx 272,000 sf. Levin's math doesn't make sense. Without Andersen should have left Levin with a 78% lease building as 60,000/272,000 represents 22% of the building. Again, Levin's math doesn't make sense."
The Andersen story is a big part of the whole picture: TRB says that "Yes, Andersen was supposed to lease a substantial amount of space, but at the last minute the deal fell apart and your report scooped the story."
TRB says that Andersen pulled out because, based on the correspondence he read from the FOIA documents, "they were basically 'turned-off' by Steve Levin's business practices. " Levin says "Anderson was not turned off, they were looking for anyway to bail after the Enron debacle."
TRB says "Levin is claiming exactly the opposite to what TMR reported back when the Andersen deal cratered. In fact, a facsimile was sent from Jeffrey Leslie (Assistant Corporation Counsel in the Law Department) to Susan Kroll on February 22, 2001 as an FYI to Ms. Kroll 'RE: HUB/Andersen deal' specifically referencing TMR's February 8, 2001 Andersen Scoop and February 9, 2001 TMR report related to Andersen's statement ---
TRB cites this entry in TMR:
"...He (Hale Chan from Andersen) explained that while my report was accurate in stating that they pulled the plug on the deal, the reason was entirely the difficulty they were having with the building owner, and not that their business is suffering..."
I did find this report which I wrote on February 6, 2001.
++++++++++++++++++++++
"February 6, 2001 titled "Arthur Andersen Develops New Technology Center in Chicago."
As a result of that note I proceeded to make a series of calls attempting to verify the story. The reception at Brijus Properties was cold; the receptionist told me "we cannot comment on that" and hung up. She did not even forward me to Steve Levin, whom I know well. My attempts at Arthur Andersen were more fruitful. I ended up speaking to Hale Chan in their PR department (312-931-8442). He told me that Arthur Andersen did not pull out of this deal lightly and that they attempted to continue the negotiations right up until the last minute when the decision was made to pull the plug. He added that when the press release was put out two days ago they were still [sentence does not appear to have been completed]
l hoping to be able to consummate the deal. But "things changed quickly." He explained that while my report was accurate in stating that they pulled the plug on the deal, the reason was entirely the difficulty they were having with the building owner, and not that their business is suffering. Understandably, he took umbrage at the claim that business is soft, and added that the company added 5,000 new people last year. I explained to him that I knew that Brijus and Steve Levin had had a history of being hard to deal with at times. So, the Andersen story seems quite credible to me."
++++++++++++++++++++++++++
Let's move on from Andersen.
COMPLAINTS FROM CONTRACTORS
TRB says that: "Based upon my findings from the 247 FOIA exercise, it appears that "monitoring" is VERY subjective. In the case of 247 there was a “draw protocol” that required 247/Levin to petition City for "draw requests" in order to fund specific objectives. Upon construction being completed, for example, or when other expenses are incurred, the "draw forms" must be submitted to the city, to the DPD/Dept of Community Development, for approval and payment. Further, it appears that there were "issues" taking place with the draw process itself. Specifically, at least one subcontractor contacted City Hall to complain that Levin was essentially engaging in a shake down. Evidently, a subcontractor would submit a draw-related invoice that Levin would in-turn submit to City for draw-funding. As a hypothetical example, let's say Levin received $200,000 from the City to fund a specific draw.
If $150,000 of the $200,000 draw was supposed to go to pay a specific sub-contractor, Levin would then approach the same sub-contractor to attempt to "renegotiate" the sub-contractor's draw-request invoice. Again, at least one subcontractor felt compelled (and disgusted enough) to formally complain to the city. As one City employee explained it in correspondence --- contractors were complaining about being shaken-down by Levin after draws were funded. Draw your own conclusions."
Steve Levin does not back down, even on this issue: "As frequently happens in construction there are sometimes disputes over the work and whether it was completed properly. The draws were funded from the city based on actual bills and lien waivers from the contractors that we submitted. Additionally we complied with using only WBE/MBE (Women and Minority Business) labor for construction."
TRB took a lot of notes but did not photocopy everything. He writes: "According to my notes ----
Susan Kroll - Project Manager in DPD sent an email (on July 26, 2002) to Steven Holler of the Law Department on July 26, 2002 informing Mr. Holler of Mr. Levin's attempts to "skim/negotiate" with performed work contractors.
Ms. Kroll specifically made reference to "Let's make a deal conversations" that Levin was allegedly having with same contractors after request draws were already funded.
Evidently same contractors were complaining to Ms. Kroll."
May here. Just FYI, it is now called the Department of Community Development but it used to be called the Department of Planning and Development.
Before proceeding, let's take a break between rounds and ask how the city makes its money on TIFs.
TRB says that: "One of the prevailing theories behind a TIF 'or' any other economic development taxpayer-funded subsidy is that a public investment (i.e., TIF) will help spur increases in job growth, increases in sales tax revenue and, in the case of high-rise residential construction, increases in future property tax revenue.
And Steve Levin points out that "Increased property tax revenue is certainly not limited to high rise residential buildings, as our commercial office redevelopment project significantly increased real state taxes generated from the building."
Once again, it may be the Irish in him, but TRB disputes this too: "DePaul University has received substantial property tax relief from the Assessor's Office
thereby marginalizing property tax generation by 247 S State. In the case of 247 S State the quid-pro-quo was essentially: Mr. Levin here is a commitment for $8,000,000 (a percentage of which will be funded to you UPFRONT at the closing table so that you may in turn fund your $9,775,000 acquisition of 247 S State). In return for the taxpayer-funded $8,000,000 commitment, Mr. Levin is to redevelop select portions of the building's infrastructure in order to create a destination and environment for technology companies - start-up companies, emerging companies and established technology companies (i.e., Andersen's Technology Initiative) for floors 2-thru-7 and the basement."
Once you get into numbers, Levin has as many numbers as TRB: The initial acquisition price was $11,500,000 of which $9,775,550 was allocated to real property and $1,725,000 to Personal Property per the Contract. In addition, we were responsible for certain costs and prorations that made the actual acquisition price approximately $12,350,000.
TRB reverts to the city records on this: "Another example of Levin's attempts at nuance and spin. Pursuant to the Recorder's Office, the building was purchased for $9,775,000 on August 6, 1999. Its my understanding that Levin's purchase of 247 S State was "subject to" his securing $8,000,000 TIF. In theory, at the time of the August 1999 closing - his basis was less than $2,000,000."
May again. There are development costs, to be sure, and that $8MM is not free and clear. No one seems to be saying that. Beyond that, this is way over my paygrade.
To tidy up another loose end, there was an RFP and several firms contended to get the TIF contract. What role, if any, David Weinstein, who was Mayor Daley's chief technology advisor at the time [followed by Katherine Gehl, followed by Chris O'Brien -- and for a short time someone else occupied that spot] played in the granting of the TIF to Steve Levin and Brijus, I do not know.
TRB says that "Among other things, the RDA stipulated that the TIF funds be used to create a Technology Building that would create 'Technology Jobs'."
TIF funds are dispensed pretty much the same way that other government funds are dispensed. There is a fund and a request and a draw-down.
TRB says that "Based upon the 247 S. State materials I reviewed at City Hall it's essentially, Levin having to collect invoices (and lien waivers) from subcontractors and then Levin submitting one invoice to City for draw funding. Levin was then required to disburse funds to same contractor. The draw request is made AFTER work is complete.
While its been a few months since I reviewed the material, I recall at least approximately a dozen draws for various amounts."
In all the TIF activity, the departments involved included the Planning Development, Law Department and Rich Daley's office (i.e., Weinstein and Gehl).
Here are some of the names that appear in the emails you provided me.
Who are each of these people?
Kathy Caisley Department of Community Development – Project Manager in Development Finance Division
Joann Worthy Department of Community Development – TIF Division
Tony Binns Department of Community Development’s FOIA Officer
Molly Sullivan Department of Community Development – Director of Communications
Mara Georges Law Department – Chief Corporation Counsel (Chief Attorney)
Susan Lopez Law Department – Chief Assistant Corporation Counsel
Jennifer Hoyle Law Department – Director of Public Affairs
Alicia Mazur-Burg - Planning & Development.
Lori Healy - Planning & Development
After all of TRB's research, I am left with a few unanswered questions.
First, who did actually sign off on the Certificate of Completion from the law department?
The city did sign off on it, but what checking did it do to ensure that the RDA had been complied with?
Second, TRB tried to get those answers: "... my impression of the Law Department/Corporation Counsel's Office is that your department is ultimately the final stopgap and/or watchdog in the context of
ensuring that all legal obligations, contractual requirements and responsibilities outlined in the copious, and fully-executed 247 S State Redevelop Agreement are fully-enforced."
A Sticky Wicket
May again. The proverbial problem for any reporter is that the sources often have their own agenda, sometimes hidden from the reporter, and sometimes out on the table. The agenda of a source, at the end of the day, is irrelevant. It helps to know what it is, but the facts must speak for themselves. The most famous anonymous source in the last fifty years -- Deepthroat in the Watergate case -- may have had his own issues with the FBI and was ticked about being passed over for L. Patrick Gray, but that did not stop him from leading Woodward in the right direction. Here we know who the source is and what his issues are.
In this case, I was aware that there had been some history between TRB and Levin, but it was very late in the game that I found out the exact details. Put plainly, TRB, a real estate broker, had a deal that he thought was signed, sealed and delivered with Levin and it fell through -- TRB was never paid on it and he feels the amount in question is $250K in commissions.
I was an IT headhunter or recruiter for seventeen years and there were some situations in witch the hiring firm told me they were definitely hiring my candidate, no ifs, no ands, no buts. And those deals fell through for a variety of reasons such as hiring freezes imposed from on high.
In business, it is not a deal until the ink is dry and the check has cleared the bank.
TRB admits that this was his initial motivation but he also told me repeatedly that he wants to see the system improved, that this was not a personal attack on Levin, but rather an inquiry into how the city handles such matters. As Stephen Meade has often said, "Process, not people."
In an email TRB wrote to me: "Further, I had an interesting meeting with a former member of Planning
& Development. He almost chopped-my-head-off when I informed
him that I'm going through the exercise of a FOIA on the marchFIRST
TIF. In fact, he specifically mentioned to me that people will think I'm
a lunatic for investigating both 247 S State and marchFIRST. I explained
that this started-out as an exercise to both collect close to a $250,000
commission from Steve Levin and to gain a better understanding of WHY
and HOW the city's technology initiatives have been miserable failures to date."
TRB continues: "Based upon my recent 247 findings its made me curious as to other
technology-related TIFS as the marchFIRST TIF ( HYPERLINK "http://www.ncbg.org/tifs/smbiz_tables.htm" \t "_blank"http://www.ncbg.org/tifs/smbiz_tables.htm)
is close to 3x the $8M TIF granted to 247.
Further, I also explained that it is my intention to have something constructive
to contribute to taxpayers, downtown businessman, technology stakeholders, et al,
at the conclusion of my thorough review of 247 and marchFIRST TIF files as I intend
to be promoting technology/sustainable job creating opportunities for the CBD [Central Business District].
Lastly, I had a meeting with a former TIF consultant re: TIFs in general and, specifically,
the 247 S State $8M TIF. 2 things to note from this mornings meeting --- (1) The former TIF consultant felt the $8M TIF was awfully high (2) Given the fact that DePaul --- a non-profit, off-the-tax-rolls owner --- now owns 247 S State, Steve Levin should have been obligated to pay-back the $8M as a condition of closing with DePaul as DePaul ownership would remove property from Tax Rolls. So far, I have found NOTHING in the files that demonstrates that the $8M was paid back. Further, the Law Department Assistant Chief that prepared the Certificate of Completion in 2008 that Levin needed in order to close with DePaul - has been stonewalling with me and, has refused to answer my written and emailed questions."
May again. This rapidly degenerates into "he said, she said." Levin says "The commission your source refers to was to be paid only if an actual lease was signed, which in this case never occurred."
The company TRB was representing at the time was Total Attorneys and TRB maintains that things went off the rails after a deal was supposed to be done.
"A lease was signed. A six-figure letter of credit (at Levin's demand) was also
negotiated and executed as a condition of the signed lease.
Pursuant to an attorney that I've consulted regarding this matter - the commission was
indeed earned even though tenant relocated elsewhere due to Levin's failure to perform.
Levin, who is an attorney himself clearly recognizes his obligations related to this matter.
In fact, the tenant subsequently threatened to sue Levin, and its my understanding that a settlement with Levin had been agreed upon and funded. Further, the subject-floor that the technology tenant signed a lease for is now occupied by DePaul University's Facility Operations Department. Same floor was top-shelf space originally designed for Hubbard One."
This all took place in 2007, a year before the building was sold to DePaul. TRB did get commission for placing the firm in another building but he is still not a happy camper.
He writes: "While I did earn a commission at other building, there is no applicable 'windfall provision' in the context of my earned commission. To this end, Levin owes me approximately $250,000 plus interest and late fees."
May again. I have no idea what the windfall provision refers to, but I can say this. If Levin knew he was planning to sell the building, is it possible that he sandbagged TRB?
In the last year of his ownership, Levin may have figured that he did not want to take the chance of a long-term lease that could have influenced the sale price for the building.
I hate this aspect of the story because it can somewhat muddy the water, so I urge you, the reader, to focus on the central issues here, and not the side-show, so to speak.
SUMMING IT ALL UP
After all of this, I tried to sum up the issues:
First, the $8MM TIF was used in the purchase of a building for about $10MM when the normal TIF percentage is 20-25% of the purchase price. The building should have been bought for $32MM to $40MM. TRB's conclusion is that this was a sweetheart deal.
Levin counters this: "The purchase price is irrelevant and only one component of the total costs. We bought a dilapidated vacant building that needed to be totally gutted on the interior and restored on the exterior. Our TIF was 22.5% right in the norm you mention above and clearly outlined in the Redevelopment Agreement. Without the TIF, this deal would never of happened."
TRB asks: "How much revenue did Levin (and ownership) generate by selling Historic Facade tax credits? How much revenue did Levin and Brijus Properties absorb in management fees (asset management, project management, construction management and property management) and leasing commission from this project?"
Another key point is TRB's contention that "The RDA was never fully executed. On October 21, 2001, Steve Levin served written notice to Alicia Mazur-Berg related to Levin's desire to market floors 2-thru-7 to non-technology tenants. Levin specifically cited the 60,000 sf Andersen deal that cratered. Levin also mentioned that 25% of the building was on the 'for-lease' market. Then on November 5, 2001 Alicia Mazur-Berg responded with a denial to Levin's request due to the following:
A. Inadequate documentation relating to I.T. prospects;
B. Lack of financials for the building.
Levin says simply that the RDA was fully executed.
Specifically, TRB told me that he tried to source any information regarding the Everest College deal (or approval process) as pursuant to Section 8.2 (b) of the RDA --even the broadest reading of same section would have a VERY challenging time classifying Everest as an Information Technology deal.
TRB contends that the City's monitoring of the progress was poor or even non-existent and contractors expressed dismay in letters to the DPD about the way Mr. Levin operated. And several major technology companies such as Andersen pulled out and most of the building was not rented to tech firms.
At the core of all this is that if the RDA has not been properly executed, or there has been non-performance with respect to the RDA, then the Certificate of Completion should never have been signed off on unless there was a claw-back. If there was non-performance by Brijus on the RDA, someone at the city should have been awake enough to red flag the deal with DePaul University so that before Mr. Levin was able to collect $35MM in 2008 for the sale of the building, he would have had to pay back some of that money through claw back provisions and that does not appear to be the case. Instead, the city signed off on a certificate of completion.
TRB says that according to Tony Binns from CDC, Steve Levin only submitted the one (1) leasing report in 1999.
Levin says plainly: "Ron. The reality of the situation is we created a unique environment to attract and foster Technology firms. We succeeded while the two other major technology projects in town that you mention, March First and Divine failed. We were all victims of the technology and dot-com implosion. Your source is way out of a line and seems to have an axe to grind which I do not understand.
TRB just does not quit: "First, I am not way out-of-line. Mr. Levin (and his partners) were the recipients of an $8,000,000 TIF that they did not pay back. Given their egregious non-performance and compliance with the executed redevelopment agreement - there should have been a demand by the City to repay a portion (or the balance in its entirety). Mr. Levin's representations that there was 'no-technology-market' in Chicago are ludicrous.
Further, Mr. Levin (and MB Real Estate) owe me approximately $250,000 plus interested and late fees. Levin is damn well correct that I have an axe to grind.
Mr. Levin is the only person who was way-out-of-line with the 247 S State project - and the City failed to reign him in.
Again, someone needs to conduct a Foresnic Audit of this deal.
I have my own loose strings to clear up including: What is the scope of the relationship between David Weinstein and Steve Levin?
TRB also has some unanswered questions:
"Levin listed Ray Chin of R.M. Chin & Associates as a partner on the 247 South State project. How much did Levin (or other partners) pay Mr. Chin for his participation in the 247 South State deal?"
That would be the end of the article but TRB feels the need to sum it up himself which he sent me Monday evening:
Ron:
Thank you for informing me that you will not censure my comments re: 247 S State's $8,000,000 TIF. While I always appreciate your opinions, let's stick to the "facts" with 247 S State $8,000,000 TIF as opinions are truly like a**holes --- everyone has one (in their family :-)
With respect to the facts ---
1. 247 S State received $8,000,000 to create a technology-based real estate development;
2. The developer of 247 S State did a poor job fulfilling the expectations and requirements of the concepts as well as the NDA.
3. City Hall did a poor job enforcing the 247 South State RDA.
4. City Hall did a poor job monitoring the leasing activity at 247 S State.
5. City Hall did not use the Certificate of Completion (or any of its other entitled powers) as 'leverage' to force developer to either comply with RDA or pay back the $8,000,000 TIF.
6. Absent the success of the 600 West Chicago (e-Port) redevelopment team (New York-based Taconic Investment Partners, Chicago-based Centrum Properties, Philadelphia-based Amerimar, and New York-based Angelo Gordon and Co.) in investing approximately $165 million to convert the building into state-of-the-art high-tech office space - City Hall hasn't come anywhere near fulfilling the hype of the Rich Daley/David Weinstein/Katherine Gehl-era.
By the way...the same consortium of investors received about $28 million in TIF funds to help create more than 2,000 residential units, 1.8 million square feet of commercial space (office + retail), and an 80-slip marina. The redevelopment resulted in a 1.6 million-square-foot (over 5 times the size of 247 S State), first-class office campus with superior infrastructure improvements including increased power, significant fiber connectivity, back-up generators, high ceilings and large floor plates. By the way, Brad Despot from Jones Lang LaSalle has done an incredible job on the office leasing at 600 West Jackson.
Brad Despot been on the project since its inception - and, to the best of my knowledge, is still involved in leasing-up the remaining vacant space. By contrast, 247 South State was a "musical chairs" of leasing agents post-Brijus' Sally Duke while MB Real Estate (formerly Miglin-Beitler) was the leasing agent and property manager at 247 South State.
By all accounts 600 West Jackson has been an incredible success from an economic-subsidy/TIF perspective and a technology development perspective. However, 600 West Chicago's enormous floor plates do not cater to smaller technology companies, and 600 West Chicago is clearly not located within the City's Central Business District - its steps from Cabrini Green and Kendall College.
Chicago's Central Business District still profoundly lacks a technology-based real estate concept(s) that caters to start-ups, emerging technology companies (internet, mobile, life sciences, energy technologies, hardware/equipment, et al) and growing companies. 600 West Chicago is Exhibit A in the effective use of a TIF for temporary construction jobs and meaningful, good-paying permanent job creation by way of emerging technology companies - Groupon, ECHO, JUMP Trading, ThinkorSwim, et al.
7. City Hall was well aware and informed of the "leasing issues" that the 247 South State project was experiencing under Steve Levin's sponsorship - yet it appears that meaningful corrective action was never taken - despite the fact that the taxpayers' $8M investment represented a substantial portion of ownership's "equity-stack."
8. 247 South State is clearly a superb location in comparison to 600 West Jackson (Red Line at Lobby Entrance, less than 5-minute walk to Southshore Rail, Metra Electric, Metra Rock Island, CBOT, Union League Club, Standard Club, University Club and Financial District) and much smaller, manageable floor-plates for smaller technology-users.
In addition to previous calls for a Forensic Audit of the 247 S State $8,000,000 TIF - a forensic audit should also "compare" the capital investments that Levin made into 247 South State vs. the capital investments 600 West Chicago ownership made during same time period. For example, both 247 S State and 600 West Chicago are historic landmark buildings so an apples-to-apples comparison of both projects should help create the necessary perspective to bring about constructive change to how TIF is implemented and managed - especially in the context of technology development.
Simply put, it would be a meaningful exercise by way of a Forensic Audit to find out why 600 West Jackson has been an unprecedented success in terms of economic development (and creation of permanent technology jobs) while 247 South State has been a colossal failure from both a TIF and Technology Development perspective. Clearly, 247 S State had a superior location and a very competitive cost-basis at its acquisition.
9. $8,000,000 has not been repaid to the taxpayers, despite the fact that 247 South State has been a colossal failure.
10. The $8,000,000 TIF should be repaid to the taxpayers by the developer as the building idled at a close to 50% vacancy for a number of years before it was sold to DePaul University, and three of the "subject-technology-floors" were leased to an associates degree for-profit college specializing in massage therapy --- hardly an emerging technology.
______________________
END OF REPORT
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