Spire developer accuses B of A of overcharging interest
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(Crain’s) — The developer of the Chicago Spire has filed a countersuit against Bank of America Corp., alleging that the bank intentionally charged too much interest in two loans related to the project.
Shelbourne Development Group Inc. and its president, Garrett Kelleher, allege that Charlotte, N.C.-based B of A overstated the interest on the loans by basing the calculation on a 360-day year, rather than 365 days.
Bank of America sued Shelbourne and Mr. Kelleher in August, seeking to collect $4.9 million on two unpaid loans for preliminary expenses for the Spire. The Irish developer allegedly personally guaranteed the loans.
Work on the planned 2,000-foot, 150-floor tower at 400 N. Lake Shore Drive has not advanced beyond the foundation.
In a filing Oct. 20 in federal court, Shelbourne concedes it did not obtain a construction loan commitment for the massive project by Nov. 1, 2008, as required, but the firm says the failure is “temporary,” because it stems from “an unforeseeable and unprecedented economic downturn.”
As a result, the lack of construction financing isn't a default on the B of A loan, Shelbourne says in its filing.
Shelbourne alleges that the loan agreement provides for interest to be calculated on a “per annum” basis, “while obfuscating and concealing the true interest rate the bank intended to charge for a calendar year.”
Charging interest based on a year with just 360 days is not uncommon on commercial real estate loans.
Shelbourne accuses the bank of “intentionally and deceptively” using “contradictory or ambiguous language” in the loan agreement.
B of A issued Shelbourne a $3-million revolving line of credit for the project in December 2006, and six months later a second loan for up to $7 million. The total amount due, including unpaid interest and charges, is $4.92 million, the bank alleges.
In its filing, Shelbourne says the line of credit was used to build out its corporate office, not for Spire development.
The second loan, which has an outstanding balance of nearly $2.7 million, was used to build out a sales center for the project at NBC Tower, 455 N. Cityfront Plaza Drive, according to a copy of the loan agreement.
Related story: Spire developer faces eviction from sales center site
Shelbourne denies B of A’s allegation that it has not gotten any payment on the loan since November 2008, saying in its filing that the bank in April took a certificate of deposit of more than $3.5 million that Shelbourne owned, and “purportedly applied the proceeds to the indebtedness.”
A B of A spokeswoman declines to comment.
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