CHICAGO | 108 North State (Block 37)

[chicubs111]

Another setback for Block 37

By SUsan Diesenhouse
Tribune staff reporter
Published March 12, 2007, 8:56 PM CDT


Block 37, the long-troubled, $450 million mixed-use project in the heart of downtown Chicago, has hit another in a long series of roadblocks: The developer building the residential portion, Chicago-based Golub & Co., has been taken off that part of the job, the company's attorney said Monday.

For almost two decades, developers have tried but failed to get the ambitious State Street project under way. The massive development, which would include offices, retail, housing and an underground train station, has lurched from start to stop to start again.

But last year, it seemed to be rolling ahead. The Mills Corp. of Chevy Chase, Md., was the lead developer. Work on the train station was started. Last fall, financially strapped Mills sold the rights to build the offices to Golub and also agreed to also sell Golub the right to build the residential portion. Finally, it seemed, a big void in the middle of the city would spring to life.

But on March 7, Golub received notice that its right to build the housing had been terminated by Mills, said Golub's attorney, Howard Swibel of Arnstein & Lehr LLP in Chicago.

Golub's residential rights, Swibel explained, "have been unceremoniously canceled." The reason: Mills wants to sell the housing to Joseph Freed & Associates of Palatine, which is now developing the 300,000 square feet of retail space in the project, Swibel said.

Calls Monday night to Freed, Mills and Mill's attorney were not returned.

Swibel added, "Now [Golub] is focused on being protected for the office portion."

Golub has invested about $7 million so far in the 440,000-square-foot office phase. Company President Michael ****** said, "It's really tough to discuss this right now."

A source close to the project said Golub still wants to complete the office portion. That seemed financially feasible because much of the building is pre-leased, with Morningstar Inc., the Chicago-based financial research firm, agreeing to occupy more than 200,000 square feet.

Unfortunately, Morningstar, and thus Golub, are entangled in a legal dispute with Mills. Morningstar agreed to lease approximately 211,000 square feet to be re-measured once construction was complete. However, it now appears that the floors that the research company agreed to take are actually 237,000 square feet.

Morningstar has balked, refusing to assume the extra expense.

Last Wednesday, Golub filed a lawsuit in Cook County Circuit Court requesting that Mills compensate Golub for the approximately $7 million it has invested in the housing and any extra expense Morningstar would incur for the office space. The lawsuit is still pending. Swibel said a hearing on the matter is scheduled for Tuesday. He added, "We are requesting that money from the sale [to Freed] goes to pay Golub what it is owed," said Swibel.



http://www.chicagotribune.com/busine...i-business-hed

[sentinel]

Originally Posted by chicubs111

Another setback for Block 37

By SUsan Diesenhouse
Tribune staff reporter
Published March 12, 2007, 8:56 PM CDT


Block 37, the long-troubled, $450 million mixed-use project in the heart of downtown Chicago, has hit another in a long series of roadblocks: The developer building the residential portion, Chicago-based Golub & Co., has been taken off that part of the job, the company's attorney said Monday.

For almost two decades, developers have tried but failed to get the ambitious State Street project under way. The massive development, which would include offices, retail, housing and an underground train station, has lurched from start to stop to start again.

But last year, it seemed to be rolling ahead. The Mills Corp. of Chevy Chase, Md., was the lead developer. Work on the train station was started. Last fall, financially strapped Mills sold the rights to build the offices to Golub and also agreed to also sell Golub the right to build the residential portion. Finally, it seemed, a big void in the middle of the city would spring to life.

But on March 7, Golub received notice that its right to build the housing had been terminated by Mills, said Golub's attorney, Howard Swibel of Arnstein & Lehr LLP in Chicago.

Golub's residential rights, Swibel explained, "have been unceremoniously canceled." The reason: Mills wants to sell the housing to Joseph Freed & Associates of Palatine, which is now developing the 300,000 square feet of retail space in the project, Swibel said.

Calls Monday night to Freed, Mills and Mill's attorney were not returned.

Swibel added, "Now [Golub] is focused on being protected for the office portion."

Golub has invested about $7 million so far in the 440,000-square-foot office phase. Company President Michael ****** said, "It's really tough to discuss this right now."

A source close to the project said Golub still wants to complete the office portion. That seemed financially feasible because much of the building is pre-leased, with Morningstar Inc., the Chicago-based financial research firm, agreeing to occupy more than 200,000 square feet.

Unfortunately, Morningstar, and thus Golub, are entangled in a legal dispute with Mills. Morningstar agreed to lease approximately 211,000 square feet to be re-measured once construction was complete. However, it now appears that the floors that the research company agreed to take are actually 237,000 square feet.

Morningstar has balked, refusing to assume the extra expense.

Last Wednesday, Golub filed a lawsuit in Cook County Circuit Court requesting that Mills compensate Golub for the approximately $7 million it has invested in the housing and any extra expense Morningstar would incur for the office space. The lawsuit is still pending. Swibel said a hearing on the matter is scheduled for Tuesday. He added, "We are requesting that money from the sale [to Freed] goes to pay Golub what it is owed," said Swibel.



http://www.chicagotribune.com/busine...i-business-hed

This is an absolute joke. Mills is a joke - Golub was cheated by them royally and quite frankly and sadly, I don't even give a s**t about this project anymore.

[SamInTheLoop]

Originally Posted by sentinel

This is an absolute joke. Mills is a joke - Golub was cheated by them royally and quite frankly and sadly, I don't even give a s**t about this project anymore.

You are correct - the criminal enterprise known as Mills Corporation did screw Golub. Golub is suing and I hope the truth comes out and Mills is forced to honor the sale of the residential portion to Golub. I want Golub in control of both residential towers, not Freed. And I want Freed on board handling only the retail - the way this deal was supposed to work. I think it's not too hard to figure out what's going on here - Steve Jacobsen (former Mills exec, now a Freed exec in charge of the Block 37 retail portion) worked out some sort of sweetheart deal with his old company to improperly remove Golub from the residential portion of the project

[Chitown]

God, I feel for Golub. Being involved in small commercial construction projects, I've seen my share of cheats; you wouldn't expect it in such a high-profile case. Getting screwed to the tune of 7 mildo is brutal.

[sentinel]

Originally Posted by Chitown

God, I feel for Golub. Being involved in small commercial construction projects, I've seen my share of cheats; you wouldn't expect it in such a high-profile case. Getting screwed to the tune of 7 mildo is brutal.

I've met Mr. Golub before, and he is a genuinely nice man, and given the fact that he has been in this business for so long and been successful at it for so long as well, I don't think this is the end of the story. Expect him and his army of lawyers to push back very hard at this affront. Mills is gonna lose big time, even more than before and it's safe to say that Mr. Jacobsen will be nicely blacklisted from the Chicago development scene for years to come for this idiocy. You don't fcuk with Gene Golub on his home turf and expect to win.

[Chitown]

Originally Posted by sentinel

I've met Mr. Golub before, and he is a genuinely nice man, and given the fact that he has been in this business for so long and been successful at it for so long as well, I don't think this is the end of the story. Expect him and his army of lawyers to push back very hard at this affront. Mills is gonna lose big time, even more than before and it's safe to say that Mr. Jacobsen will be nicely blacklisted from the Chicago development scene for years to come for this idiocy. You don't fcuk with Gene Golub on his home turf and expect to win.

Sadly, though, winning and getting paid are two different things. Best of luck to him; I hope he hoses Mills.

[Marcu]

Originally Posted by sentinel

I've met Mr. Golub before, and he is a genuinely nice man, and given the fact that he has been in this business for so long and been successful at it for so long as well, I don't think this is the end of the story. Expect him and his army of lawyers to push back very hard at this affront. Mills is gonna lose big time, even more than before and it's safe to say that Mr. Jacobsen will be nicely blacklisted from the Chicago development scene for years to come for this idiocy. You don't fcuk with Gene Golub on his home turf and expect to win.

Couldn't agree more. The case will likely be settled and Jacobsen will be out of the Chicago construction scene for a while. Don't know if this is relevant, but Golub was one of Daley's biggest campaign contributors at 50k.

[SamInTheLoop]

Originally Posted by sentinel

I've met Mr. Golub before, and he is a genuinely nice man, and given the fact that he has been in this business for so long and been successful at it for so long as well, I don't think this is the end of the story. Expect him and his army of lawyers to push back very hard at this affront. Mills is gonna lose big time, even more than before and it's safe to say that Mr. Jacobsen will be nicely blacklisted from the Chicago development scene for years to come for this idiocy. You don't fcuk with Gene Golub on his home turf and expect to win.

Nothing would please me more than to see Golub succeed - I hope this is settled quickly with Golub retaining the residential component...

[SolarWind]

March 13, 2007

[Norsider]

Originally Posted by SolarWind

March 13, 2007

I hope I'm way off here, but get the feeling that this building is turning out to be a real shit sandwich.

[sentinel]

Originally Posted by Norsider

I hope I'm way off here, but get the feeling that this building is turning out to be a real shit sandwich.

I think it's way too early to tell; they're still framing this one.

[the urban politician]

Originally Posted by Norsider

I hope I'm way off here, but get the feeling that this building is turning out to be a real shit sandwich.

^ I find it silly that you think you can form that opinion based on a steel skeleton

[SamInTheLoop]

Originally Posted by sentinel

I've met Mr. Golub before, and he is a genuinely nice man, and given the fact that he has been in this business for so long and been successful at it for so long as well, I don't think this is the end of the story. Expect him and his army of lawyers to push back very hard at this affront. Mills is gonna lose big time, even more than before and it's safe to say that Mr. Jacobsen will be nicely blacklisted from the Chicago development scene for years to come for this idiocy. You don't fcuk with Gene Golub on his home turf and expect to win.

I hope you're right. I mean - what is Steve Jacobsen's greatest accomplishment in Chicago-area real estate development? Gurnee Mills? What a joke.......And how long was he dragging his feet on the Block 37 retail leasing effort while Mills controlled it? Give me a break - it took him a couple years to even release a short bs list of tenants that were 'interested' (no leases signed or 1 at the most) and that was only after intense pressure from the city to come up with something........does anybody else get the impression that Jacobsen is a total hack??

[CHIllini]

This morning from the bus going East on Washington I noticed a line of dump trucks formed cutting through the site. I think the major excavation has begun!

[chicubs111]

Ruling paves way for sale of Block 37 residential to Freed

A court ruling has cleared the way for Mills Corp. to sell the residential portion of the Block 37 project in the Loop to developer Joseph A. Freed & Associates LLC.

Mills earlier this month terminated its contract with Chicago-based Golub & Co. to develop the project’s two residential towers in favor of a new deal with Freed.

Palatine-based Freed first arrived on the scene in November when it agreed to buy the retail portion from Mills, which is exiting the long star-crossed project on State Street between Randolph and Washington streets.

Golub, which will continue to build an office tower at the site, sued Mills, seeking a $20-million lien on the residential project to cover repayment of $4 million it spent on the development and $16 million related to a dispute with the largest tenant of the office tower, Morningstar Inc.

Cook County Circuit Court Judge Stuart Palmer on Thursday rejected Golub’s request for the lien, which Mills CEO Mark Ordan says means the sale of the residential portion to Freed could close within several weeks.

“We obviously are very pleased by the outcome,” Mr. Ordan said Friday from Mills’ headquarters in Chevy Chase, Md. “It means the big question mark in the middle of the city is soon not going to be a question mark.”

Mills was represented in the matter by John Chen, partner with Chicago firm Chen Nelson Ltd., and Indianapolis-based law firm Ice Miller LLP.

Golub executive vice-president Lee Golub says the firm is “weighing our options” over its next move, and declines further comment about the lawsuit.

Mr. Ordan says Mills dropped Golub from the residential portion because the firm was trying to pay less than it had agreed.

“The price Golub originally promised to pay proved to be very different than what they were willing to pay at the end of the day,” Mr. Ordan says, declining to provide details.

Mr. Golub wouldn’t respond to that.

“I’m not going to get into that,” Mr. Golub says. “We wish the project success on the residential side. We’re happy to be part of Block 37 in the capacity of office developer.”

Yet in its lawsuit, initially filed March 7, Golub asserts that the office and residential developments are “vitally inter-related.” Losing the residential portion is a blow to Golub. Mr. Golub has previously said profits from the office building are thin, no more than 7.1% to 7.2%.

Related story: Block 37 office costs trim Golub's profits

The 16-story office tower, which is under construction, is to be anchored by WBBM-TV/Channel 2 and a new headquarters for mutual fund rating company Morningstar.

Morningstar signed a lease with Mills to occupy 211,200 square feet in the building. Subsequent measurements show the company’s space will actually be about 237,000 square feet. Golub’s lawsuit says Morningstar is refusing to pay more rent for the additional 26,000 square feet.

Judge Palmer in his decision says Golub can’t seek money to cover potential damages from the discrepancy since Morningstar hasn’t even taken legal action. The judge also notes that Golub knew the 211,200-square-foot figure was an estimate.

“The buyer knew of this problem when he went forward with closing on the office component,” Judge Palmer said Thursday, according to a transcript of the proceeding. “The fact of the matter is that the plaintiff knowingly bought a problem.”

Block 37 has seemingly been jinxed ever since the city demolished most of the block in 1989 to clear the way for a Helmut Jahn-designed high-rise. That project ultimately failed, as did several other attempts over the years.

Mills, which is in the process of being sold to another mall developer, was the first firm to begin construction after being selected by the city in 2002 as master developer of the mixed-use project, which is to include 265,000 square feet of retail space, a new Chicago Transit Authority station, the office building and the two residential towers.

Mills revealed large losses on failed projects elsewhere just more than a year ago, and also said it was facing a cash crunch and a Securities and Exchange Commission investigation into its accounting.

Mills CEO Mr. Ordan says the company is confident Freed will keep its portions of the Block 37 project on schedule. Freed executives didn’t respond to calls seeking comment.

“We obviously felt very comfortable with the decision to work with Freed” on the residential portion, Mr. Ordan says.


http://chicagobusiness.com/cgi-bin/news.pl?id=24266

[ardecila]

Well, good news for Block 37. I have faith in Freed... but damn, what a backhanded move. I feel bad for Golub, hopefully they can recover their money through a later suit.

[honte]

Well, now that we have said our regrets for Golub, I guess it's safe to speculate on possible benefits from this deal.

- Could the hotel component return?
- Could we get a different firm than SCB? There's the chance of it getting better, but also an even bigger chance of it getting worse.
- Could we maybe get a tower with some real height, a landmark befitting the endless wait and public money spent on this disastrous site?

[SamInTheLoop]

Originally Posted by honte

Well, now that we have said our regrets for Golub, I guess it's safe to speculate on possible benefits from this deal.

- Could the hotel component return?
- Could we get a different firm than SCB? There's the chance of it getting better, but also an even bigger chance of it getting worse.
- Could we maybe get a tower with some real height, a landmark befitting the endless wait and public money spent on this disastrous site?

I've had the same questions. I'm worried the design could be worse....hopefully the city will pushback on anything mediocre or worse...a hotel would be nice and obviously makes a lot of sense at this site, but I won't complain about 800 units of residential instead...I think it's probably unlikely we'll get anything over 500', but I suppose anything's possible...

[SamInTheLoop]

Originally Posted by Lukecuj

never post after daytime st pats drinking....^ hopefully this project stays on track. The one thing i don't get is, after the city spent all that money bringing back the theatres along Randolph, why didn't they support some sort of theatre component in this project?

I think the city actually was pushing for some sort of live theater component...personally I think something like that could be incorporated, but I don't think it's a necessity...

[spyguy]

Originally Posted by honte

Well, now that we have said our regrets for Golub, I guess it's safe to speculate on possible benefits from this deal.

- Could the hotel component return?
- Could we get a different firm than SCB? There's the chance of it getting better, but also an even bigger chance of it getting worse.
- Could we maybe get a tower with some real height, a landmark befitting the endless wait and public money spent on this disastrous site?

Bring back P+W! Or pretty much anyone else besides SCB, LL, or P/H.
Really the most pathetic part about this development is the office tower which has a height appropriate for the suburbs, not for a valuable piece of property downtown.