A bankruptcy reorganization plan for the company behind the Chicago Spire was confirmed in federal court Tuesday, as a new potential investment partner emerged in developer Garrett Kelleher’s quest to complete the famously unfinished project.
During a confirmation hearing in federal bankruptcy court in Chicago, attorneys for Kelleher’s Shelbourne North Water Street and its financial partner in the reorganization, Atlas Apartment Holdings, said they had a conditional commitment letter from StoneBeck Capital, of New York City, to fund Shelbourne’s reorganization plan.
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But the confirmation of the plan starts the clock ticking, and much must be accomplished for Kelleher, Shelbourne and Atlas to hold on to the site past the end of the month. Under the reorganization plan, Shelbourne has until Oct. 31 to make at least a partial payment to Related Midwest, which acquired the debt on the coveted site more than a year ago and helped force Shelbourne into bankruptcy in October 2013.
In February, Kelleher crafted a financing agreement with Northbrook-based Atlas Apartment Holdings under which it would supply, either from its own funds or from other investors, up to $135 million to enable Shelbourne to pay creditors and exit bankruptcy. In return, Atlas would take control of the 2.2-acre site at 400 N. Lake Shore Drive and, with Kelleher’s assistance, develop the site. Kelleher has said he still wants to construct the twisting 2,000-foot-tall residential building he imagined before the housing market crashed.
The site has remained a fenced-off hole in the ground since 2008.
Once out of bankruptcy, the Atlas-Shelbourne team still would need to secure construction financing for any project.
On Tuesday, attorneys for Shelbourne and Atlas cautioned that the nine-page conditional financing letter from StoneBeck included three pages of substance and six pages of caveats. Terms of the commitment letter were kept confidential, but an appraisal and environmental survey of the site have not been completed, attorneys said.
Atlas continues to “spend money by the bucket load” to advance an agreement, Atlas attorney Doug Bacon told U.S. Bankruptcy Court Judge Janet Baer. “This is a better deal and it is more likely to close,” he told Baer. But he noted: “You don’t know you have a deal until the money flows.”
Baer questioned the tight turnaround time for Atlas and StoneBeck to craft a deal before the Oct. 31 deadline. “It’s a legitimate concern,” Bacon told the court. “It’s going to come right down to the wire.”
There is no alternate financing plan or source waiting in the wings if the StoneBeck talks fall apart, attorneys told the court.
After the hearing, Northbrook-based Atlas’ CEO Steve Ivankovich said he has worked with StoneBeck previously and the agreement now under discussion “is a juicy deal for us. I give it a better than 50 percent shot but it’s tough to say. This is a very tight, tough site to get your head around.”
In seeking confirmation of the plan, Shelbourne attorney Joseph Frank told Baer that Kelleher “could have thrown in the towel. He didn’t.”
After the hearing, Kelleher said that he was delighted with the plan’s confirmation and that the work toward a last-minute financing agreement didn’t really surprise him. “It was always going to be a bit of a drill.”
Under the payment schedule, Shelbourne must pay Related more than $109 million by Oct. 31 or $22 million by Oct. 31 and more than $92 million by March 31, 2015, to fulfill the terms of the plan. If neither of those payments is made by Oct. 31, the reorganization plan calls for Related to take title to the property and pay other creditors’ claims. Related also would take control of the site if Shelbourne and Kelleher decide not to move forward with the plan.
A spokeswoman for Related declined comment. Representatives from StoneBeck were not immediately available.
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