The curse of the North Loop won’t strike again, vows Chicago Planning Commissioner Christopher Hill.
News that Garth Drabinsky, flamboyant founder of Toronto-based Livent Inc., was suspended from the company amid an investigation of financial irregularities set off alarms all over City Hall.
Hill talked by phone with Livent officials, including Chairman Roy Furman, on Monday and Tuesday, trying to make sure that the renaissance of the Oriental Theatre in which the city has staked so much won’t be stopped or slowed by Livent’s troubles.
The Oriental, which is being restored by Livent’s Chicago subsidiary in preparation for opening previews of “Ragtime” on Oct. 27, is perhaps the crucial element in City Hall’s hallowed dream to transform the North Loop–where best-laid plans have often become fiascoes–into a theater district.
Hill said he received confirmation that the construction completion and show opening will take place as scheduled, and also requested an accounting of Livent’s costs to compare with the city’s paperwork on the deal. “We don’t want any discrepancy on who got what money,” Hill said.
The suspensions of Drabinsky and Livent Vice President Myron Gottlieb, both of whom had been demoted in a recent company financial and management restructuring, came in the course of an internal probe of financial irregularities involving millions of dollars, according to the company.
Hill also said he received assurances that Livent still has $40 million operating cash to go on with continuing productions in Chicago and elsewhere.
Despite the anxiety, Hill said the city is confident Livent will adhere to its promises to finish the theater–already more than 80 percent done–and keep it in use for stage productions until 2007.
That’s when the city’s tax increment financing agreement, under which the city is spending more than $15.5 million on the $32 million Oriental project, runs out. So far the city has spent about $13.5 million and Livent more than $10 million.
Hill said if Livent defaulted on any of its agreements, from construction to ongoing productions, the city could declare a default, try to take over $5 million in escrow funds left for the project and sue Livent as well.
“If it hit the fan, those are the things we would do–but now we have no intention of doing them,” Hill said.
Rent hikes: Class A office rents being asked in downtown Chicago were up 5.3 percent in mid-1998 over the end of 1997, more than the average 3.9 percent rise of 12 key North American cities surveyed by GVA Worldwide, a strategic partnership of leading independent real estate firms.
In the biggest four downtown markets surveyed, Manhattan Midtown North went up 7 percent, to an average of $46.13 a square foot; Chicago went up to $30 a square foot; Manhattan Downtown rose 5.2 percent, to $32.64 a square foot, and Washington rose 6.1 percent, to $38.50 a square foot.
Los Angeles, the fifth-biggest market for Class A space, posted the second-to-lowest asking rent, $17.76 per square foot, only a 1.4 percent rise. L.A. also had the highest Class A vacancy rate, at 20.7 percent in the survey. Chicago Class A vacancy rate was posted at a below-average 7.7 percent.
Another survey by Torto Wheaton Research, the forecasting arm of CB Richard Ellis Services Inc., said office vacancies across the U.S. fell for the 10th straight time in the second quarter, to an average rate of 9.2 percent.
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Torto Wheaton predicted about 70 million square feet of new office space will be developed this year, up from 25 million last year.
REITs on the march: Prudential Real Estate Investors, based in Parsippany, N.J., reports that public ownership of U.S. real estate kept climbing last year, with real estate investment trusts gaining a substantial share of regional malls.
REITs owned 28.6 percent of regional malls as of the end of 1997, up from 24.7 percent in 1996. And public ownership of office properties doubled, going to 5 percent of the total from 2.2 percent in 1996.
The survey said the market penetration of publicly traded companies in other property types was: hotels, 17.5 percent (up from 14.3 percent); apartments, 6.8 percent (up from 5 percent); warehouses, 5.3 percent (up from 3.6 percent), and non-mall retail, 10 percent (up from 9 percent).