Can a New York developer dig out of this Chicago hole?
Chicago officials want to landmark the two low-rise buildings on this River North site where Symmetry Property Development had planned a condo-hotel tower (inset).
A New York real estate developer's wager on River North is turning out to be a deal from hell.
Nearly two years after unveiling plans for a 60-story condominium-hotel tower on a site just west of Michigan Avenue, Symmetry Property Development is facing dwindling options for the parcel after being outfoxed by local preservationists and a protective alderman. Adding to its troubles, the developer is facing a federal lawsuit demanding the whereabouts of nearly $50 million raised from Chinese investors to finance the project.
"Where's the money? Where did it go?" says Doug Litowitz, a Deerfield attorney representing one of the investors. "They won't say. What kind of a game is this?"
It's been a lopsided game so far, with the project's opponents beating Symmetry every step of the way. The firm suffered its toughest defeat March 7, when the Commission on Chicago Landmarks voted to grant preliminary approval to a proposed landmark district including two historic buildings, at 42 and 44-46 W. Superior St., owned by Symmetry. A landmark designation would thwart Symmetry's plan to demolish the buildings, something it needs to do to make way for its project.
"If they get landmarked, it's going to be very hard to do anything of significance" on the property, says Lee Golub, executive vice president of Golub, a Chicago developer that plans a high-rise next door.
Symmetry's experience highlights a hot topic in Chicago politics these days: aldermanic privilege, or the vast—excessive, say critics—power that aldermen possess to veto projects in their wards. Downtown Ald. Brendan Reilly, 42nd, rejected Symmetry's earlier plans for its property, and he took the extraordinarily aggressive step of slashing the zoning on the site last year. He supports the landmark district proposal.
The case also raises new questions about the federal government's controversial EB-5 visa program, which allows developers to raise money for projects from foreigners who get to become U.S. residents in return. Critics of the program say it's vulnerable to fraud like the kind alleged in the lawsuit against Symmetry. In 2017, a Chicago developer was sentenced to three years in prison after pleading guilty to charges that he scammed Chinese investors in a proposed $912 million hotel project near O'Hare International Airport.
Symmetry's top executive, Jeffrey Laytin, did not return phone calls, nor did attorneys representing the developer in the litigation. Reilly did not respond to requests for comment.
Laytin, a New York intellectual property attorney, teamed up on the project with partners including Brad Reifler, a well-known Wall Street trader who filed for personal bankruptcy protection in 2017, according to an offering memorandum. Reifler says he merely raised money for the project and was not involved after 2014. He says he is still owed about $150,000 for his services.
The New Yorkers lined up Chicago residential developer Fordham Real Estate as their local partner. A Fordham executive declines to comment.
The group had a booming real estate market and prime site working in its favor when it started pitching its plan to Chinese investors in early 2015. The project would be "at the heart of Chicago's most sought after neighborhood, located at the northeast corner of Superior and Wabash Streets, one half block from Tiffany's front door," according to an offering memorandum.
Yet it was an increasingly congested neighborhood, one reason Reilly has shot down multiple high-rise proposals for the block over the past several years. Symmetry and Fordham initially floated a two-tower project in a joint venture with Golub, which owns the property immediately to the east, but scaled back to the one 60-story tower unwrapped in March 2017.
Designed by Skidmore Owings & Merrill, the project would have included 246 condos, 216 hotel rooms and 120 timeshare units, and would have covered both Symmetry and Golub's sites. Neighbors panned the proposal, and Reilly refused to approve it, saying it would clog up surrounding streets.
"It's simply too much for this block," he wrote in an email to constituents.
Symmetry kept a low profile until last fall, when a demolition firm acting on its behalf applied for permits from the city to demolish the two historic buildings on Superior Street. The move caught the eye of Preservation Chicago, a local advocacy group, which launched its push for the creation of the 15-building Near North Side landmark district. Less than a month later, Reilly introduced a proposal to "downzone" the properties, a tactical move to force Symmetry to extend a deadline by which the city would have been required to issue a demolition permit.
Checkmate?
Reilly and preservationists declared checkmate March 7, when the landmarks commission approved the landmark district in a preliminary vote. An attorney for Symmetry testified against the move, saying the buildings did not meet city criteria to be designated landmarks.
What the attorney didn't say is that, if the City Council endorses the district, Symmetry and Fordham will be left with a much smaller site where it would be difficult, if not impossible, to support a tall building.
"As a coroner I must aver, I've thoroughly examined her, and she's not only merely dead, she's really most sincerely dead," Litowitz writes in an email, borrowing from the "Wizard of Oz."
Symmetry will be running up more legal bills fighting off the federal suit over its $49.5 million in EB-5 financing. One Chinese investor, Annabelle Yao, filed the complaint, but Litowitz is seeking class-action status to cover other EB-5 investors in the project. Symmetry, which denies that it's hiding money, has agreed to return Yao's $550,000 investment plus interest, though it has yet to make the payment, court records show.
Golub, meanwhile, still wants to build on its property, currently home to a four-story building in the middle of the block. The property does not include an adjoining four-story building at the corner of Superior and Rush streets best known for a Giordano's restaurant.
A document Golub filed with Cook County last year shows plans for a 21-story, 143-unit condo tower on its site, but Lee Golub says that's just a placeholder. Golub has yet to present a new proposal to Reilly, he says.
The 21-story building "might happen or it might not happen," Golub says.
https://www.crainsnewyork.com/real-estate/can-new-york-developer-dig-out-chicago-hole
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