Prairie Blocks plan tossed
Judge gives McCormick-area developers one last chance to escape bankruptcy
12/12/2012 10:00 PM
Prairie Blocks, the South Loop mega-project which planned to add two hotels, retail shops and entertainment to the McCormick Place area, is on its last legs.
The project has been mired in bankruptcy for years, as Prairie Blocks’ developers Pam Gleichman and Karl Norberg have battled with Centerpoint Properties Trust, which gave developers a loan early on that’s now in default.
On Wednesday, Dec. 5, Bankruptcy Court Judge Jack Schmetterer tossed Prairie Blocks’ most recent plan to emerge from bankruptcy, and gave the developers just 10 days to file one last plan — or the case would be dismissed.
The plan set aside by the judge called for the property to be split into three parcels — a 1,000-room hotel that would be branded a Marriott Marquis, a second smaller hotel and a parcel designated for a data center.
The plan called for a pair of investors to pay $100 million, collectively, to buy the two hotel parcels, once the project emerged from bankruptcy.
But Schmetterer said that letting the plan leave bankruptcy without money first on the table simply wasn’t an option.
“If we don’t have a sale that can be completed in bankruptcy, that will not be a lawful plan,” Schmetterer said.
It’s understandable, Schmetterer said, that Prairie Blocks’ investors wouldn’t want to put money down before the project was out of bankruptcy — it’s a risky proposition. But by confirming the plan without having money on the table, Schmetterer said, Centerpoint would instead be at risk.
“These investors don’t want to take risks,” Schmetterer said. “Under this plan, the debtor is seeking to throw risk back on Centerpoint. It’s a proposition which I will not accept.”
Schmetterer said the developers have 10 days to try to realign their money and come back with one more plan.
“I urge them to take their best shot, because it’s the last one they’ll get in this court,” he said. “Whatever you can do, this is the time to do it.”
After Schmetterer’s ruling, Gleichman said she would try to convince her investors — Ground Lease Capital Partners and Global Builders — to pony up money while the project was still in bankruptcy.
“We’re going to explain to [Ground Lease’s head, Steve Waldman] what this judge has said,” Gleichman said. “I’ve got a tremendous amount of confidence in Steve.”
If the developers’ final plan fails to impress Schmetterer, the site could be destined for a very different use: an arena for DePaul’s basketball team.
Jim Reilly, head of the state agency that runs McCormick Place (known as the Metropolitan Pier and Exposition Authority, or McPier), has publicly said they hope to build an arena near the convention center.
Crain’s Chicago Business’ Greg Hinz has reported that the Prairie Blocks site is being targeted for the arena. Attorneys from McPier have attended several of the Prairie Blocks bankruptcy court hearings.
If Schmetterer dismisses Prairie Blocks’ final plan and thus, the case, Centerpoint would then control the site. They’ve said they plan to auction off the property. In fact, they already had scheduled one auction before being foiled by Prairie Blocks’ second bankruptcy filing.
A spokeswoman for McPier declined to comment on a potential arena site, but confirmed that they are looking at the prospect.
The Prairie District Neighborhood Alliance, a group whose main turf is the residential chunk of the South Loop directly north of McCormick Place, has spoken out against an arena on the site. After putting out an online survey about a potential arena, the group’s leader, Tina Feldstein, wrote a letter supporting the Prairie Blocks project.
“A lot of people would like to see an arena in the South Loop, but don’t feel this is the best location for it,” Feldstein said. “People are concerned about transients, traffic and people are concerned that an arena is a dead space most of the year. What they want to see is restaurants and retail.”
The Prairie Blocks developers’ final plan is due by Dec. 15. A preliminary hearing is set for Dec. 17.
As of Tuesday, Dec. 11, the plan had not yet been filed.