But, hey, it's more than we've heard from the alderman about Wilson Yard.
Wilson Yard developer answers lawsuit allegations, by Lorraine Swanson
Holsten Real Estate Development is responsible for developing more than $500 million in affordable, market rate, mixed-income, mixed-use housing and commercial developments throughout the city, according to the company's Web site. The firm's president, Peter Holsten, the sole developer of the embattled Wilson Yard project, talked to News-Star after a lawsuit was filed last week against the city and developers Fix Wilson Yard.
Were you aware that a group of Uptown residents opposed to the Wilson Yard development were putting together a lawsuit?
I was aware. They tried to get us to change our plan and tried to impact the various funding sources that went into putting this deal together. Failing that, they're resorting to the court system, which is their right. My opinion is that it's about the affordable housing. We worked long and hard to bring something for everybody. ... I have no idea what will happen in court, but the city was aware of this and feel they did the TIF process properly.
Various limited liability companies are named in the plaintiffs' complaint as defendants, in addition to the city. Do you have partnerships in these LLCs?
We're not hiding anything. We're the sole developer. If they're suing the developer, we're it.
Other developers involved at the beginning of this project dropped out, leaving you as the sole developer. Can you offer any insights why this happened?
My original partner took ill and had to back out of the project. Unfortunately, he's since passed away. At one point we were looking at an assisted senior living facility. We brought in Catholic Charities, but there were issues because there were others around here and HUD wasn't wild about the assisted living facility deal. We decided on an unassisted senior building for adults 55 and over who are capable of independent living. ... That's why Catholic Charities is no longer involved.
Residents opposed to the project have said that the project has changed from mixed-income housing to housing for "low income, very low income and extremely low income." Has the housing component changed?
Those are nomenclatures used by the Illinois Housing Development Authority. The most people can make is $55,000 per year. We believe that we'll have a complete balance of folks making [annual incomes] in the $20,000, $30,000 and $40,000 [range]. The cutoff is the $50,000 [range]. We want people working and to be good citizens. ... We're very management intensive. We're in people's faces all the time. We'll screen tenants and do monthly apartment checks for overpopulation, cleanliness, etc.
The lawsuit alleges that an amendment to the Wilson Yard TIF ordinance was passed this fall in which the city allegedly relinquished its rights to any legal recourse to recoup public funding for this project. In other words, you and your partners will get paid regardless of whether the project is finished.
We closed on the financing two or three months ago. Over a year ago, the country got into financial trouble and banks got weird. We sold subscriptions to the TIF in order to bring cash into the deal. Pretty much everyone who bought the TIF notes were small banks and some large banks, too. Oftentimes the city issues the TIF notes after construction, but we needed the TIF notes prior to construction. We're asking the banks to take on construction loans and loaning money against the TIF if something goes wrong. The only way we could get the banks to buy the TIF notes was to take away the construction risk. This has nothing to do with the developer and hasn't taken us off the hook.
Those are nomenclatures used by the Illinois Housing Development Authority. The most people can make is $55,000 per year. We believe that we'll have a complete balance of folks making [annual incomes] in the $20,000, $30,000 and $40,000 [range]. The cutoff is the $50,000 [range].
ReplyDeleteFirst of all, how sad that Holsten and Helen have refused all conversation with the community. Secondly, those "nomenclatures" used by IHDA are to force the developer to define the income levels. Lastly, those "nomenclatures" Holsten provided to IHDA don't match up with what he's saying.
We have grown so used to lies from Holsten from the backward Aldi, timelines, and reasons for other developers backing out so I have no ounce of trust in what he's saying. A court of law will force the truth or will catch him for perjury.
What a lying sack of crap. How can he say with a straight face that the TIF ammendment that guarantees payment has nothing to do with him. What kind of twisted logic is that?
ReplyDeleteThe banks knew the project was screwey and they're rightfully scared to lend money to a screwey project. Holsten was going to back the loan with his own collateral, so he got the city to put up the taxpayers in his stead.
But no, using taxpayers for your own collateral has nothing to do with you. Someone needs to kick this guy in the nuts.
So I'd like some input on how I read the following comment from Holsten. He says:
ReplyDelete"We sold subscriptions to the TIF in order to bring cash into the deal...we needed the TIF notes prior to construction. We're asking the banks to take on construction loans and loaning money against the TIF if something goes wrong. The only way we could get the banks to buy the TIF notes was to take away the construction risk. This has nothing to do with the developer..."
So the way I interpret this is that Holsten is basically saying that he didn't have enough money to move well into construction without selling TIF notes. I sort of thought the purpose of a TIF was to "warm up" developers to certain properties in which they weren't sure that they could work deals for. In other words, they would look at a parcel and think, "well, the city wants me to replicate something that I have done elsewhere but I really can't do it here because I can't sell units for the same price or rent out retail space for the same price. But, with the subsidy that concern is taken off the table."
What I never thought a TIF was for is to push along an impossible development project. The logic behind TIFs is supposedly to let the market do what the market does but nudge it in one direction or the other because certain blighted areas need help faster than the market is willing or able to move.
If the deal is good, why wouldn't the banks want to assume construction risk? If they are not willing to assume construction risk, why should the taxpayers? It seems to me that risk is being shunted around. Everyone wants to be there when the checks come rolling in after there are residential and retail tenants, so why isn't there anyone willing to assume risk in order to get there?
This isn't my area of expertise, but I'd really like to know what others think. Thank you.
So is this why the delivery cost for each unit is so high...because so many notes were sold to so many financial backers against our tiff dollars??? Isn't this why the banks got in trouble in the mortgage crisis...by dividing the risk so much that no one knows who is actually responsible for it? Creative financing!
ReplyDeleteThis TIF subscription comment is gold. This is a great opportunity for FWY to obtain all of this information in discovery.
ReplyDeleteI know two small banks in Chicago that bought TIF subscriptions for the WY project. I'm told they had no interest in buying them without the City backing their risk. I'm also told they bought their subscriptions in August of this year.
One word for him:
ReplyDeleteScum
If the project was a good project they wouldn't have needed any TIF money.
Sassy: My hunch is the cost to carry became prohibitive with the disintegration of credit markets. Btw, what we're seeing today in terms of consumer credit began more than a year ago in other financial sectors such as construction. Construction loans have been non-existent for awhile now. WY probably had to borrow money under less than ideal circumstances ($$$) to meet pre-existing obligations.
ReplyDeleteIt could be worse: As I understand it, there are TIFs that have borrowed against future increment accrual and still done NO projects whatsoever.
Your peterapologies Suzanne don't account for the years between 2000 and 2006 when financing was cheap and easy.
ReplyDelete"Oftentimes the city issues the TIF notes after construction ... "
ReplyDeletewhat????
name 3
" ... they're resorting to the court system, which is their right. My opinion is that it's about the affordable housing."
ReplyDeletewell, it's an uninformed opinion
that's pure spin
did he read the complaint? its primary concern is with the legitimacy of the TIF and the process; the affordable housing component is a minor issue
"We sold subscriptions to the TIF ... "
ReplyDeletewow
I've never hear the process of selling TIF notes described so crassly
Holsten missed his calling: selling subscriptions
"The only way we could get the banks to buy the TIF notes was to take away the construction risk. This has nothing to do with the developer and hasn't taken us off the hook."
ReplyDeletethe only way this project could get built is to take everyone off the hook except taxpayers
the only way we could get Holsten to build this project is to take away his risk
Holsten is not on any hook
between local property taxes, a CTA give-away, and state and federal tax credits, WY is a massive public works project
And why didn't the News-Star ask about the cost for building each unit. That's my major concern and why I contributed money to FWY. I know everyone wants to make us out to be evil condo owners that don't want affordable housing. I am okay with affordable housing. My two major concerns are:
ReplyDelete1) The cost of building each unit is ridiculously high and not based on the market (i.e. $450K for 2 BR/2 BA when you can buy one for $330K in our neighborhood).
2) High density affordable housing models have failed in the past, how will they address that issue?
Thanks News-Star for asking all the questions that I didn't need BS answers to...
I thank you for the insight that WY is best understood as a public works project, Hugh.
ReplyDeleteJust for argument's sake, let's just say that the city council decided it was their goal to build more affordable housing for the city. Although they were willing to earmark a large sum from this year's budget (ok...stop laughing now and stay with me here!) what regulations and guidelines, if any, would they need to follow in order to access additional state or federal funds to support their goal? Beyond state and federal dollars, is it likely that they would float a bond to pay for the rest? Isn't that what the usual mix for these projects is? Various government monies + loans + perhaps charitable dollars?
What I am trying to get at is if the TIF financing option weren't available to the city, how else could they build affordable housing and what regulations and guidelines would this approach necessarily trigger? Why is it important (or not) that WY will not be subject to any of them?
question not asked that I would have most like to have had answered:
ReplyDeletewhat's all this about someone forging your signature on a filing with the IHDA?
The only reason WY was ever designated a TIF is because it was the only way Shiller could pack in more low income housing. This would not have worked with a private developer, although she could have negotiated market rate housing with set-asides for low income homeownership - but that would have made too much sense.
ReplyDeleteSo because her warped sense of reality, we have Holsten the Clown as the lone developer and a lawsuit to try and stop the silliness.
follow-up question not asked that i would have most liked to have had asked:
ReplyDeletespeaking of "us" being on the hook, Kemo-sabe, how much of your personal cash is tied up in this project, and I don't mean mortgages secured by the former CTA property, and I don't mean money fronted pending receipt of a tax credit, I mean Peter Holsten cash money?
Reading between the lines, Hugh, it seems that the answer is "very little." Otherwise, he wouldn't have needed to raise so much money before construction was started. The go-go real estate market that we just experienced should have made developing this site entirely possible. Property values all around were going up but the CTA sale price set a low-baseline for the development. Credit was easier than ever and investors were eager to get into real estate deals.
ReplyDeleteI've been asking the same for months now Hugh. No one's offered how much Peter wealth is invested. (Not counting money given to Helen.)
ReplyDeleteJust for argument's sake, let's just say that the city council decided it was their goal to build more affordable housing for the city. Although they were willing to earmark a large sum from this year's budget (ok...stop laughing now and stay with me here!) what regulations and guidelines, if any, would they need to follow in order to access additional state or federal funds to support their goal?
ReplyDeleteForget that. If the City wants to do anything it can propose a development and then float bonds to pay for it. Someone has to underwrite the bonds, so the banks will need assurance the city will assume the risk on the bonds, but certainly make the interest payments on time.
The problem here is that why would the city do this when Mayor Daley has made the last 15 years of his tenure a public-private partnership that tries to give away the land to private developers in exchange for building mixed income developments.
Holsten's political problem with WY is that there is no mixed income portion. It's Seniors, low income, very low income, and extremely low income.
Looking at the project as it is right now. Is there any privately owned capital at risk AT ALL?
That's why their is a lawsuit. Wilson Yard has turned into the "Windy City Development" and the public has no input at all in which way the wind blows. Holsten has his "lenders of last resort". The people have their lenders of last resort, the courts.
I'm getting Peter a shovel for Christmas.
Essentially, the city is doing whatever the hell it wants with our tax money. The tax payer has absolutely not input to how this money is spent. Da Mare has been doing this for an awfully long time. Shiller, too, has done very little to lift the people of her ward out of the sewer during her tenure. So why have these people remained in office? Why has there been no public outcry? Don't get me wrong here, Uptowners are now getting off their derriers and getting things done, in a big way I might add, but took so long? We all should have been far more vigilant long ago. What is a real shame is that the rest of the city will read the Reader article and hear about the law suit and think "Those poor folks in Uptown" without realizing they're next in line. What a mess.
ReplyDeleteOh, and I don't say this nearly enough, Thank you to each and every one of you for doing something.
Hopefully they got Mayor Daley on tape talking to Blago.
ReplyDeleteHe looked worried the other day and he is the only one not asking for Blago to resign.
Love to see this corrupt City cleaned up.
Hey, is that Dietrich from Barney Miller ?
ReplyDeleteJust a little FYI...I just did a real estate search on the Tribune site and found 86 listings in Hinsdale under $450. Maybe Peter would like to by those since his so altruistic. Hinsdale has a much lower poverty rate than Uptown and could definitely integrate low, very-low and extremely-low income income families. The housing would be less concentrated as well. Two absolutely verifiable factors in succefull development of low income housing.
ReplyDeleteSorry...$450K
ReplyDeleteHonestly that's what is crazy they are spending 450K per unit to build these places.
ReplyDeletespeaking of "us" being on the hook, Kemo-sabe, how much of your personal cash is tied up in this project, and I don't mean mortgages secured by the former CTA property, and I don't mean money fronted pending receipt of a tax credit, I mean Peter Holsten cash money?
ReplyDeleteDo you mean that I, as a homeowner in the Wilson Yard TIF district, probably have more of MY money invested in Wilson Yard than Peter Holsten, and definitely more than Helen Shiller?!
More of our money is going into this than what many of us are putting into our retirement accounts each month.
ReplyDeleteWhen is the next reassessment? Is it possible that property values will sink low enough that property taxes are below the frozen TIF level? What do they do then, with no more TIF money coming in?
ReplyDeleteWhat do they do then, with no more TIF money coming in?
ReplyDeleteThe city sells your parking meters.
Oh, wait... They already did that.
Whatever else the public owns, they sell it, and they probably sell it to someone who contributes a lot of money to politicians.
Or to be more clear, they lease whatever public assets haven't already been leased out to cover all the budget shortfalls and pay off bonds sold against the non-existent future tax increment.
Maybe we can sell a vacant governor's office. I hear that will be opening up soon. That sh*^ should be worth f#$@ing gold, man.
ReplyDelete