Spire developer faces eviction from sales center site
(Crain's) — The owner of NBC Tower has sued to evict Irish developer Garrett Kelleher's firm from the riverfront skyscraper, where Shelbourne Development Group Inc. has a lavish sales center for the stalled Chicago Spire project.
Shelbourne, which leases the entire 18th floor in the 36-story building, hasn't paid rent since April 1 and owes more than $316,000, according to a complaint filed in Cook County Circuit Court by a partnership that owns the building.
If Shelbourne is evicted, the firm could lose much of its $10-million investment in the sales center, which includes a fully built-out model, conference rooms and meeting areas.
The eviction suit is another sign of financial strain for Mr. Kelleher's once-glittering plan to build a 2,000-foot skyscraper on a site along the north bank of the Chicago River, west of North Lake Shore Drive.
More than a year ago, the Spire's architect, Santiago Calatrava, joined a cadre of contractors filing liens against the site for unpaid bills. Mr. Calatrava alleges he is owed $11.34 million. In August, a lender sued Shelbourne to collect $4.9 million on two unpaid loans used to pay for preliminary development expenses.
Related story: Bank of America sues Spire developer
Yet earlier this month, Mr. Calatrava preached patience on the 150-story development, saying the massive project would take more time.
"My personal wish is that it is not dead," Mr. Calatrava was quoted as saying in Tribune architecture critic Blair Kamin's blog on ChicagoTribune.com. And a spokeswoman for Mr. Kelleher told Mr. Kamin that prospective buyers were still visiting the sales center.
Maybe not for much longer.
On Friday the building owner, a partnership controlled by the family of German billionaire Hugo Mann, is to ask a Circuit Court judge to order Shelbourne to resume paying rent until the eviction case is decided. A ruling could force the hand for Mr. Kelleher, Shelbourne's executive chairman.
The Shelbourne spokeswoman downplays the litigation.
"The issue is a typical tenant/landlord dispute that we expect to be resolved amicably," she says in an e-mail statement. "During our time there, we've experienced a few minor issues, and hope the management is more responsive to our concerns."
The statement did not describe the nature of the dispute, and Shelbourne has not yet submitted an answer to the complaint, which was filed Aug. 12.
Attorney Scott Kenig, a partner in Chicago law firm Randall & Kenig LLP, which represents the partnership, declines to comment.
Shelbourne could be trying to force a rent reduction.
In mid-2007, when times were different, Shelbourne signed a lease for the space to run until Dec. 31, 2010. The firm is currently required to pay annual rent of $488,714, or $21.21 a square foot. The floor measures 23,033 square feet, according to real estate data provider CoStar Group Inc.
As part of the deal, the Mann family partnership contributed $344,495 toward construction of the sales center.
In the meantime, the landlord is drawing down on Shelbourne's security deposit, the spokeswoman says.
"The (NBC) tower is currently not owed money," she adds.
As security, Shelbourne posted a letter of credit in the amount of $443,000 as of Oct. 1, 2008, according to the lease.
Earlier this month, a Circuit Court judge denied Shelbourne's request for a jury trial after the Mann partnership argued that the lease contained a waiver of the right to such a trial. Shelbourne contended that the jury trial waiver violated the Illinois Constitution and that it can seek immediate appellate review of the ruling.
The sales center is separate from Shelbourne's Chicago offices, at 111 S. Wacker Drive. The firm also has offices in Dublin, Ireland.
"The Chicago Spire project is very much alive and yes, we are still talking to potential buyers interested in purchasing units," Shelbourne's spokeswoman says in the statement. "The economy has definitely slowed things down, but the project is moving forward."
