From Crain's Chicago Business: "The Daley administration is bailing out the developer of the high-profile Cabrini-Green redevelopment on the Near North Side, sidestepping a default on a $32-million construction loan that would be a punch in the gut to the ambitious plan to remake the city's public-housing projects.The administration has agreed to pay a $3.4-million public subsidy early, lowering the sales target needed to get the money and trimming the number of homes in the 263-unit, mixed-income condominium development, which has been hurt by slow sales. The deal funnels badly needed cash to a venture led by developer Peter Holsten that on Dec. 15 was unable to pay off a J. P. Morgan Chase & Co. construction loan." Read the entire story here.
Come on, guys. Early payment on dollars already committed to be paid is not the same thing as a bailout. At most, it's an advance, an advance on the exact kind of project many had hoped for at Wilson Yards.
ReplyDeleteSay what you will about Holsten, but he did not cause the housing market to collapse. For a real bailout drama, follow TARP dollars and bank executives bonuses.
If you think "bailout" is reactionary phraseology, you should take it up with Crain's, who titled its article: "Cabrini-Green redevelopment project gets bailout money from city of Chicago." Funny enough, the article was written by Shiller's neighbor and supporter, Thomas Corfman.
ReplyDeletemiddle-class homebuyers, who are the key ingredient in the mixed-income formula
ReplyDelete*cough*
Ah, but we didn't get that kind of development at WY, did we?
What we got were subpoenas and lies.
Lots and lots of lies.
Question: is it the market that is scaring off buyers at Town Hall, or is it the same crappy, unimaginative and wholly uninspiring architecture we're seeing at WY?
I sure as hell would be reluctant to purchase something in a development with such a thin brick facade that looks like it's been slapped together.
Holsten did not create the collapse, but he's done a rather poor job in responding to it (hat-in-hand is not a recovery strategy).
But, it is good to see that Holsten has the mayor's attention on the Project for Redevelopment.
That explains quite a bit.
I contacted Holsten back in Sept and October regarding the units at Wilson Yard to see if I could get in as a regular (non-subsidized) tenant and no one would tell me anything. They took my name and said they would contact me.
ReplyDeleteFinally I received a call last week asking for my address so they could mail info to me. I asked if they would be ready in April for move ins and the lady said they will have people moving in February and March.
If I was willing to pay them full rent for a unit, why in the world wouldn't they have contacted interested people sooner? Usually people need to give 30 days notice to current landlord or find a subleaser if the landlord will not let them out of their lease.
If they had all the ready units filled Feb. 1 they would be making money... what are they waiting for??
It's a bailout. To call it anything is misleading. He's in trouble like all developer that didn't have any real money in their deals.
ReplyDeleteAnd yes it projects like Holstein's that caused part of the RE melt down.
These developers would not have been so risky if they would have had use their own money or do conventional financing.
Come on, Susanne.
ReplyDeleteBail out or Advance? Absolutely no difference.
Holsten would be in default if it were not for public assistance. Why are we (taxpayers) subsidizing Holsten’s risk?
Holsten did not causing the housing bubble, true. He reaped the large profits on the front side of the bubble, and asks us to insure the back half.
Manage your cash Holsten. Need to sale more units? Lower the price. Take the margin hit before you shake the change cup in front of taxpayers. Shame on Daley for propping this up.
Please remember this, when it is time to vote for the Mayor.
what are they waiting for??
ReplyDeleteThat's a good question.
Any answer you get would depend on the person giving it to you.
"Early payment on dollars already committed to be paid is not the same thing as a bailout."
ReplyDeleteEarly payment is a additional pubic subsidy. There is a very real cost to the taxpaying public. TIF balances are held in interest-bearing accounts. What is lost in earned interest will be made up from our property taxes.
As we saw with Republic Windows and many other Chicago TIF deals, the checks & balances and payment milestones we thought we were agreeing to when the Daley administration stumped for a project fall by the wayside when push comes to shove.
This article is an excellent catch by Corfman.
This story elucidates further how TIF in Chicago is used to shift risk from the private to the public.
Come on? Come on what? You don’t understand the difference between a bailout and an advance? Let’s put it this way, if you were late on your condo payment, would you ask your for family for a gift to pay off the balance or an advance on your salary to bridge the gap?
ReplyDeleteAs for Hosten and other public housing developers, they are not operating in a “natural” market. There simply isn’t enough dough to be made in mixed income housing (which is why there are so few developers willing to engage these types of projects). By definition, mixed income housing is a subsidized enterprise and one that has to operate within margins private developers won't touch.
It’s a S*#% sandwich anyway you cut it. There’s a lower profit opportunity and a greater risk exposure, which is why the advice to lower the price is nice but fails to grasp this simple fact: it doesn’t result in a “margin” hit. It means Hosten and others are selling below cost.
Now that may make you feel good, thinking that evil developer man is getting his due but selling below costs hurts a lot more people than just Holsten. There are the people who bought into the development at market price. They get hosed for believing and investing. And then there is the concept itself, the one many in Uptown say is more viable than the one being built at WY. It takes a hit, maybe even a fatal one if combined with the ire of enough upside down buyers. In other words, there is absolutely no upside for hanging Hosten. None.
And finally, Holsten didn’t ask us to insure the back half. We asked it of ourselves. When we---as a city---make the commitment to affordable housing, we are ones that insure and underwrite it. That’s how it gets built. If you believe there are developers willing to build it without those commitments, bring ‘em around. There’s a city council full of Alderman who like to meet this person.
Just walk around the Parkside Development and you'll notice why those units aren't selling and why they won't sell. Even if buyers show up with cash, those units aren't selling.
ReplyDeleteHolsten needs a bridge loan to nowhere. The type of development that still needs to occur at the location is ten years away in a booming economy.
Burke knows he's got to move the people first before they can talk about demolition.
And finally, Holsten didn’t ask us to insure the back half. We asked it of ourselves. When we---as a city---make the commitment to affordable housing, we are ones that insure and underwrite it. That’s how it gets built. -Suzanne Elder
ReplyDeleteHolsten is getting criticized because of his history of handling affordable housing in Uptown. If Holsten was genuinely interested in making affordable housing work, he would have done his homework on what would attract market-rate buyers into the affordable housing mix. He didn't and chose to sacrifice his principles to get the project underway. Now he's getting grief for it. Good.
By the way, his silence on the real cost of each of the affordable units within WY has me "just wondering" what the real truth is. His accusations that Uptown residents didn't like being around poor people was divisive rather than enlightening. I will never trust the man.
"Holsten didn’t ask us to insure the back half."
ReplyDeleteIn assessing our development partners' risk in tackling affordable projects in Chicago, it is worth remembering that deals financed from TIF in Chicago include lucrative "developer's fees" as a publicly-funded TIF expense item. For example, Holsten Development Corp got theirs from WY to the tune of 7 figures, rain or shine. Also worth recalling is that these projects are largely other people's money, the back half is somebody else's skin.
A S*#% sandwich is correct. A piping, hot meal Holsten and the bank can split. Let the taxpayer abstain.
ReplyDeleteReal estate development is a risky proposition. It should be, or we would (continue to) overbuild. If you remove risk by advancing the developer cash on obligations not met, you artificially reduce risk and incent developers to keep building.
The real winner here is the bank. The city propped up Holsten, who pays the bank. JP Morgan Chase is paid in full on a distressed asset. The two parties that should be feeling financial pain (Holsten and the bank) live to fight another day, build another albatross.
We as tax payers should never pooh-pooh financial mismanagement. Hold elected officials accountable.
"We as tax payers should never pooh-pooh financial mismanagement. Hold elected officials accountable."
ReplyDeleteCouldn't agree more. I just don't see how this one is all Holsten's or what there is to be gained by not advancing him a payment that was already agreed to. The time premium is the only thing that's shifted here. As for the per unit costs at WY, that figure is derived from an unreliable project total divided by the total number of units. I wouldn't bet a donut on it.
Hugh, you know I bow at your alter but this is nothing like Republic Window. Those TIF dollars were transferred to a private company in return for a jobs commitment, among other things. Here, the TIF dollars are subsidizing a public good (granted, this may be where the world views are rubbing).
Seems to me the bigger issue as I mentioned earlier is still TIF reform, TARP accountability and real banking regulation. Oh, and while I'm dreaming this good government dream, let me add to it a strong, robust City Council that actually debates issues, programs and appropriations, including those for affordable housing, and that the budget is wrangled and won through a transparent, participatory process that produces an auditable trail of revenue, expenditures, assets and liabilities.
There's a paragraph that reads: ,But the city has agreed to lower that threshold to 43%, cut the number of market-rate units to 177 and reduce the overall TIF by about $300,000, according to an amendment approved by the City Council last month.
ReplyDeleteMaybe I'm mis-remembering facts, but I thought our alderman has continually stated that a TIF cannot be amended? Does that mean that her statements are not accurate?
"As for the per unit costs at WY, that figure is derived from an unreliable project total divided by the total number of units. I wouldn't bet a donut on it." - Suzanne
ReplyDeleteI bet you a jelly donut that any organizational manual would suggest the best way to deal with false speculations is to speak up and provide the truth. We've heard nothing from Holsten or Helen about what they project are the real costs of the WY housing units.
I wonder if the media will ever pressure them for a real answer when there's a grand opening?
And for the remaining few who think the community should give Helen and Holsten the benefit of the doubt in their silence about the actual costs of Wilson Yard, please read the front page of the Trib today to learn just how much personal profit there is to be made in affordable housing (hint: $685K annually).
ReplyDeleteIt's time to dispel the myth that doing what you believe to be good public works (i.e. redistributing other taxpayers' dollars toward the needy) is incompatible with profiteering. Helen Shiller's primary accomplishment is corraling likely voters into her ward, and she demands a six-figure salary. Robert Creamer unblinkingly commited felonies that appeared to facilite his collecting a generous salary. This lady gouges the system in a way that would make wall street bankers blush. So the community has every right to be suspicious over how much profit Holsten is making on WY.
It's also interesting that Holsten demands guarantees for his developments because there are risks involved, but when homeowners move to Uptown and seek stability in their property values (or in their public safety) they are demonized for such requests.
Just wondering, the problem with focusing on Helen and Holsten is they are trees and we're talking forest. We may not like how they’re doing what they’re doing but they are, for all intents and purposes, compliant with the letter of the law. So, if you don’t like what’s happening with TIFs---I sure don’t---you must change it at the state level. Playing out the argument on the streets of Uptown is just noise.
ReplyDeleteSo is pointing out one outlier crook that made the cover of today’s Tribune, Usually PC. That story says nothing about affordable housing and everything about the dishonesty and incompetence of that organization’s board.
Usually PC, we view the world differently. You do not see affordable housing as functionally beneficial and don’t believe that tax dollars, whether appropriate via the regular budgeting process or through the Mayor’s shadow budget, should be redistributed to the needy.
I believe assistance, in a variety of forms, is a legitimate function of government and not because I’m all capital “L” liberal but because I know the numbers and the accounting paints a much more boring picture than your narrative: Public investments in housing and human capital have high and reliable paybacks---for everyone.
Including you.
For example, Uptown did not take the same price hit as other areas during this downturn because speculation was just not as rampant here. Granted, you may have bought at the peak and it may not feel that way to you personally, but statistically that’s accurate. Some of the contributing factors to price stability IS affordable housing. Yep. The dang thing people like to point to as the source of all ills actually contributes to price stability.
Now, if what you really want is appreciation (or growth), then you would be better off in other neighborhoods where there is greater speculation. But therein lies the rub, greater speculation means greater risk and it shows in areas like Lincoln Square, West Town and other areas where the depreciation rates in recent years have been nauseating.
Finally, I think it’s important to remember that every homeowner is, to varying degrees, subsidized. Every year when you write off the interest and property tax portion of your mortgage payment, you are receiving a real benefit from the federal government, one that no renter enjoys.
So, if you don’t like what’s happening with TIFs---I sure don’t---you must change it at the state level. Playing out the argument on the streets of Uptown is just noise. Suzanne Elder
ReplyDeleteI agree. It's ironic, however, that state intervention is needed because the Helen's of Chicago won't monitor themselves. I will continue to have the expectation that our elected city officials will act responsibly with my tax dollars.
I will also place pressure on my elected state officials to pass laws to make my elected city officials behave.
Suzanne - I am a huge New Deal liberal, and believe strongly in government investment in people, because it does reap benefits at all levels. But I believe that simply throwing streams of money with no expectations of return does not reap the same benefits.
ReplyDeleteI also believe that many of the people in the far left progressive wing are not acting simply out of a generous spirit, they are acting out of self-serving motivations. As yesterday's Trib showed, there is money to be made in the non-profit sector, and that lady is hardly the only profiteer in the field. Which gives us an obligation to see how much cash Holsten is pocketing from Wilson Yard. He is free to earn money by working; he is not entitled to any money, much less clear profit, becuse of his belief system.
There is also political power to be made in concentrating poverty in finite geographic regions, and this power can be consolidated by making these regions exclusively held by social welfare recipients. Helen Shiller is not a woman who could make a respectible living in the private sector, and her obvious limitations would keep her from holding office in anything other than a tailor-made district. But we as taxpayers are not obligated to provide her a six figure salary just because of certain beliefs she espouses.
And if the progressive community is tired of the Helen-bashing, is it so impossible to find a progressive interested in running for her office who is not a divisive, self-serving paranoid recluse?
I misread you, Usually PC. I happily stand corrected.
ReplyDeleteI agree; blindly throwing money at problems is ineffectual and cannot realize maximum benefit. I also agree that self-interest run amok is not only costly, both in terms of dollars and other inefficiencies, but because it affects an obstacle, a wall of mistrust, that makes the right and best choices even harder to make.
It is not often clear to me what people mean when they call themselves a progressive. To me, progressives are more conservative in their approach to public finance and fiscal responsibility than far-left democrats. It’s not that progressivism shies away from social justice and responsibility but rather engages the mission with pragmatism and sound economics with an unequivocal commitment to ethical representation and personal accountability.
Defined in this way and set in the context of Chicago, its impotent city council, and the old machine models of organization and patronage (save one, maybe two delightfully rogue Aldermen), do I think it’s that difficult to find capable progressives interested in taking on the job? Absolutely.
But it’s not just the scarcity of qualified, willing candidates; it’s that even the “right” person isn’t enough. Representation is not a static affair, it’s a partnership, a dynamic that demands the participation of informed, engaged voters---the very thing the regulars have worked hard to eliminate. It also requires a better appreciation among voters that the skills needed to win office are sometimes antithetical to skills needed to do the job.
It also requires a better appreciation among voters that the skills needed to win office are sometimes antithetical to skills needed to do the job.
ReplyDeleteSometimes you really make me smile.