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November 23, 2011

Crain's investigation: The high price of political payback at McCormick Place

Crain's Chicago Business
by James Ylisela Jr.

Forest City Enterprises pops up in a political scandal that has cost Illinois taxpayers a half-billion dollars.

Illinois House Speaker Michael Madigan cost taxpayers nearly half-a-billion dollars by blocking repeated efforts to restructure McCormick Place bonds and finance a much-needed second hotel at the convention center, a Crain's investigation finds.

Between 2005 and 2010, Mr. Madigan stopped five refinancing bills, ignoring declining interest rates that would have saved hundreds of millions. At the time, he never explained why, but his reasons seem petty and political: McCormick Place CEO Juan Ochoa, an appointee of then-Gov. Rod Blagojevich, had fired a Madigan ally at the convention center, and lawmakers from both parties say the speaker wanted retribution.
...

But politics may not have been Mr. Madigan's only motivation. By holding up refinancing, the speaker also denied McCormick Place the money to build a new hotel. That bought time for clout-heavy developers Gerald Fogelson and Cleveland-based Forest City Enterprises Inc. to push a controversial land swap and hotel deal with McCormick Place on property just north of the convention center. Both were then clients of Mr. Madigan's law firm, Madigan & Getzendanner, but the speaker denies any connection.
...

While McPier's efforts to restructure its debt and finance a hotel were going nowhere in the General Assembly, a group of well-connected real estate agents, developers and lawyers were pushing hard for a deal that would transform the vacant land into a thriving community called the Gateway Development.

Gateway was the brainchild of Gerald Fogelson and Forest City Enterprises, creators of nearby Central Station, an 80-acre spread of high-end townhouses and condominiums where former Mayor Richard M. Daley once lived. The $4-billion Gateway plan called for condominiums, apartments, senior housing, office space, retail, entertainment venues and, at the south end of the property, a twin-tower hotel for McCormick Place.

The plan was as beautiful as it was ambitious, offering Lake Michigan views and easy access to Soldier Field and the Museum Campus. But there was a catch: To make the deal work, Mr. Fogelson and Forest City wanted McCormick Place to give up five acres of prime vacant land along Lake Shore Drive in exchange for less than two acres they owned toward the back of the property, documents obtained by Crain's show.

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NoLandGrab: Imagine if Crain's put a little effort into investigating the Atlantic Yards deal, instead of mindlessly cheerleading for it.

Posted by eric at November 23, 2011 9:10 AM