Developer B.J. Spathies is in a showdown with Lehman Brothers Holdings Inc. over Prairie House, a slow-selling upscale residential development on the Near South Side.
The Chicago developer failed to pay off a $9 million, 3-year-old mezzanine loan that came due Oct. 31. In response, the New York investment bank scheduled a Dec. 9 foreclosure auction for the venture that owns the unsold units in the 14-story condominium project.
But Spathies, CEO of Bejco Development Corp., said she expects to close on Dec. 15 on a new loan from Construction Lending Corp. of America that would pay off Lehman and National City Bank, which holds a first mortgage construction loan that also came due Oct. 31.
The two lenders are owed a combined $32 million, she said. Lehman issued the foreclosure auction notice because of a bureaucratic mix-up, she said.
In its auction notice, Lehman says the two lenders are owed $49 million.
Attorney Craig Reimer of law firm Mayer Brown Rowe & Maw LLP, who is handling the auction for Lehman, declined to comment.
The 187-unit project at 1501 S. Prairie Ave. was completed this year. Lehman says just 66 units have been sold, though 83 are under contract.
Meanwhile, National City also holds a $4.4 million land loan, due Oct. 31, on the site of Prairie Tower, a proposed 23-story condo tower at 1601 S. Prairie Ave.
Spathies said she is negotiating an extension of that loan and is hopeful she can arrange construction financing “shortly.”
In September, Lehman took back RiverBend, Spathies’ downtown condo high-rise, after a default on another mezzanine loan.
Researching space: Encyclopaedia Britannica Inc. has hired real estate firm CB Richard Ellis Inc. to study its long-term space needs, including a possible move from Britannica Centre, 310 S. Michigan Ave. Britannica has about 91,000 square feet of space under a lease that expires in late 2007, a spokesman said.
Wilson Yard deal: Century Theatres Inc. has signed a letter of intent to lease an 18-screen movie complex as part of a mixed-use development proposed for the 5-acre Wilson Yard site in Uptown, sources said.
More than a year ago, the Daley administration selected Holsten Real Estate Development Corp. and Kenard Corp. to develop the vacant, city-owned property south of the Wilson Avenue elevated train station.
An agreement between the developers and the San Rafael, Calif.-based movie theater chain would be a key to their proposal, which is expected to include mixed-income housing.
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City officials are aware of Century’s interest, but the developers are still working on their proposal, a Chicago Planning Department spokesman said.
Loft project planned: A joint venture of MCZ Development Corp. and Centrum Properties Inc. is planning the residential loft conversion of a huge, antiquated warehouse building on the Near West Side.
Built in 1920, the 500,000-square-foot structure at 1020 W. Adams St. is mostly four stories high, though a portion has two additional floors.
The joint venture has a contract to buy the building from a partnership that includes veteran real estate investor Charles L. Strobeck of Chicago-based Strobeck Real Estate Inc.
Sources said the price was between $17 million and $18 million, and includes a vacant, adjacent parcel.
The Chicago-based developers’ plans include creating three large, landscaped interior courtyards. The project must receive city zoning approval.
S&L leases: Washington Mutual Inc. has leased 3,500 square feet of space at Three First National Plaza, 70 W. Madison St., said Thomas Danilek, a senior vice president with Houston-based Hines Interests LP, which co-owns the building.
The Seattle-based savings and loan has also leased about 4,000 square feet at the Pittsfield Building, 55 E. Washington St., said Daniel Nauert, vice president with Chicago-based Special Assets Inc., which manages the building.
Chicago-based Baum Realty Group Inc. represents Washington Mutual.