Et tu, Muntu? Another Local Outfit Loses Millions

posted by chicago pop

[source: Chicago Tribune, April 21, 2010
http://www.chicagotribune.com/news/local/chicago/ct-x-c-muntu-dance-loan-20100421,0,3989679.story]

47th Street: Boulevard of Broken Dreams.

Today's Tribune reports that higher-ups are finally starting to wonder what ever happened to Muntu's performing arts center that was supposed to go up on 47th Street eight years after it received millions in grants and pledges and the official go-ahead.

Eight years ago, the nonprofit Muntu Dance Theatre secured more than $6 million in city and state grants, rights to the two-acre property for $1, and cash donations from the likes of ComEd and Boeing to build a $15 million performing arts center.

At the time, the project came with the blessings of local leaders who hoped to not only turn around the fortunes of an area littered with liquor stores and boarded-up buildings, but help restore a piece of Bronzeville's historic luster.

But Muntu could not demonstrate it could pay for the project, leading the city to later rescind its $1.75 million grant offer, said Pete Scales, spokesman for the city's budget office. Now the state has called a special meeting Wednesday to see what happened to the $4.5 million it granted the dance company. [video clip here]

It will be interesting to learn how this latest of Hyde Park Kenwood white elephants came about. For now, it makes a sad bookend with the old Co-Op space a few blocks to the east. Odds are, Muntu's story may wind up sounding a lot like the sad history of the Co-Op's 47th Street branch.

Pity Zaleski and Horvath Market Cafe next door, sandwiched between this white elephant to their west, and the vacant lot + billboard = cash machine for whoever owns the lot to the east.

Shuttered Bank Branch on 53rd Street A Window to Credit Crisis

posted by chicago pop

A Bad Bet: WaMu Location in Hyde Park

The story of the shuttered Washington Mutual branch at 1364 E. 53rd Street is not unique. It was repeated all over the city of Chicago and nationwide during the five year boom in bank-branch expansion. The boom saw corner cafes, fashion boutiques, dry cleaners, and other neighborhood retailers displaced by bank branches willing to pay top dollar for central urban locations, driving up lease prices and driving non-bank competitors out.

Filter Cafe at Damen and Milwaukee; the ladies' boutique at St. James and Clark; readers can undoubtedly supply many other examples of unusual local businesses replaced by sleepy offices with a few tellers and an ATM over the last half decade.

As of 2009, many of the local retailers that preceded the branches are long gone. The news is that now, many of WaMu's bank branches are going, too. Fifty-seven of them by March 2009. For the retail fabric of Chicago's neighborhoods, the outcome is a net loss. On some Chicago blocks, there is now less retail occupancy in 2009 than there was 5 years ago.

The Washington Mutual property on Hyde Park's beleaguered 53rd Street commercial district is a paradigmatic case.

In 2004, as the credit boom was nearing its peak, a handsome though dilapidated brick building at 1364 E. 53rd Street was home to a number of rental units, and a ground floor fully occupied by five independent retailers.

In 2005, 1364 E. 53rd Street was purchased by a new owner, MAC Properties, and the leases on the ground floor retailers were not renewed. The retailers left, and in 2006 were replaced by a Washington Mutual Bank branch.

Now it's gone, too.

So turns the wheel of fortune. Is 1364 E. 53rd better now than it was before? Before: 5 independent, minority-owned businesses in a solid but run-down building, some of them delinquent in rent payments. After: a building preserved from the wrecking ball, refurbished, and returned to the market as rental units by its new owner, a building that now presents a quarter-block, 5,000 square foot stretch of empty storefront where the bankrupt WaMu branch used to be.

1364 E. 53rd Street, Hyde Park

WaMu's branch expansion began in 2002 and was part and parcel of the high-risk, rapid-growth strategy that led the venerable thrift bank into the choppy waters of subprime mortgages, subprime credit cards, and other risky forms of lending. As the Chicago Sun-Times reported of WaMu Senior VP and Group Manager Tony Manisco in April of 2004, the bank executive was "focused less on deposits and more on customer service and profitability from checking accounts and mortgage loans."

Using a concept devised in Las Vegas in 2000, one of the housing bubble's epicenters, WaMu set out to be the Starbucks of retail banking, an off-site living room where you could bring the kids and sign on to a low-rate home equity line of credit at the same time. As Manisco put it in 2004, "They use the mortgage, home equity products as the initial point of contact ... with attractive rates, and then they try to add other products."

By 2005, WaMu's attempt to break into the Chicago market was being called out by analysts as a bust. By late that year, WaMu had built 147 Chicago branches from scratch, at costs of between $750,000 to $2 million apiece, but had carved off only 0.3% of deposits in the Chicago metro area.

Hyde Park's MAC Properties, in what was probably a riskier move than they appreciated, signed a lease with WaMu at about the same time that analysts began pointing out how WaMu's expansion had come up short.

In 2006 WaMu began closing branches. In 2008, Chicago home foreclosures on WaMu-originated mortgages were outnumbering those of almost all other lenders, with 51 in February 2008, 64 in April, and 43 in September, according to foreclosure reports from the real estate website www.realinfo.net.

The ironies of history. Now we have a landlord at 1364 E. 53rd who had a bank tenant paying $32/square foot and now has nothing; had he kept the paying tenants cut loose in 2005, he would be in a better position. Instead, he signed with a financial institution that has gone down as the biggest bankruptcy in US history, which has caused the credit markets to freeze up, and a recession to accelerate, all of which make it highly unlikely that he will find a new tenant for the space vacated by the bank that drove the businesses out to begin with.

The viral spread of bank branches may be over for now, and it's a good thing. Chicago suburbs recognized earlier than most the dangers posed by their irrational multiplication to healthy commercial districts. They began to zone against it when they realized that no one would want to visit a downtown full of bank branches, a district that closed at 5PM and had displaced the very businesses that would take all the money withdrawn from all the conveniently located ATMs.

[This post also appears on Huffington Post Chicago]

Pat Dowell Hates on U of C for Buying Empty Buildings and Vacant Lots

posted by chicago pop

Stop #1 on the Pat Dowell Anti-Development Tour

Chicago 3rd Ward Alderman Pat Dowell just had a NIMBY coming-out party.

Or at least it looks like she is trying to get in the Club. And nothing helps score some NIMBY street cred better than hating on the University of Chicago.

But it's not just hating on the U of C that makes you a NIMBY -- if that were the case, we'd have to include hundreds of College students -- it's how you hate on the U of C that makes you a NIMBY.

To really get street cred as a NIMBY, you have to be stuck in the 60s, the way Pat Dowell accused her 3rd Ward Aldermanic predecessor Dorothy Tillman of being "stuck in the 80s" before walloping her in the 2007 city council elections.

You have to believe, like the greatest Hyde Park NIMBYs, that what happened in the period of Urban Renewal, racial turnover, Civil Rights, and inner city decay formed a template that will forever govern the operation of Chicago politics.

You have to think that the grass-roots organizations that were formed then, over 2 generations ago, if not before (whether the Hyde Park Co-Op, the Harper Court Foundation or The Woodlawn Organization), are still relevant and effective, and that the stories these organizations tell about themselves are accurate interpretations of history.

Most importantly, when you get a chance to build something useful on a vacant lot or empty building, you say "No thanks," and make arguments about why you should be able to control and obstruct the buying and selling of private property.

Buy this land? How dare you!

Dowell makes it very clear what she wants in her letter, sent to U of C President Robert Zimmer, Mayor Daley, and, um, the Hyde Park Herald (August 13, 2008).

She doesn't want the University buying land in her ward.

She says as much, referring to her "expressed reservations about the university purchasing land in the Third Ward at this time."

Dowell claims that the University is being high-handed by not bringing her in on its real estate plans, even though she has made it clear that she doesn't want the University in her neighborhood to begin with.

So why is she surprised she's not in the loop?

Even though NIMBY-ism clearly comes in a variety of colors, it still operates according to the same conservative and self-serving logic, in which paranoid speculations are cooked up on the basis of skewed understandings of changes that happened before a lot of us were born.

The 3rd Ward version of NIMBY-ism -- like one of Dorothy Tillman's hats, it can be taken off a hook and worn by anyone -- comes in a standard package that includes ritual incantations about the "history of the university's relationship with its neighboring communities."

We're all supposed to know what this means, we read about "the history" in the papers, University officials work through their guilt by endlessly admitting that there is a "history", when what this history really boils down to is one incident in Woodlawn that happened 50 years ago in utterly different historical circumstances, and with negative unintended consequences that have left that neighborhood worse off than if it hadn't experienced "the history" in the first place.

The story is this: in the early 1960s, the University of Chicago wanted to use federal urban renewal funds, with the support of municipal condemnations, to bulldoze and redevelop Woodlawn the way it had bulldozed parts of Hyde Park, which would have resulted in the displacement of low-income households the way it already had in Hyde Park.

Big Sky Country in Pat Dowell's 3rd Ward

Local folks mobilized to prevent this. It never happened. Local folks were happy, and then their neighborhood went to hell. Somewhere along the line, at the instigation of The Woodlawn Organization and now-convicted felon and former 20th Ward Alderman Arenda Troutman, they tore down the 63rd Street spur of the El, something increasingly regarded as one of the dumbest decisions in the history of mass transit.

Fast forward half a century: urban-renewed Hyde Park is a diverse community on the upswing, with its fabric more or less intact, anchored by the University of Chicago.

After The Woodlawn Organization achieved its goal of blocking University-led renewal of its eponymous neighborhood, however, it was unable to keep the area from descending into the very death spiral that the University had sought to forestall, losing population, businesses, and tax base over the next 30 years, as middle class blacks followed their white predecessors out the door.

That's a victory? Maybe not, but it provides a useful scapegoat.

This is the myth that Pat Dowell uses to impute Original Sin to the University of Chicago, and to try to score points with 3rd Ward constituents. It's a myth because the times have completely changed, though the racially charged NIMBY rhetoric has not.

My bet is that today's 3rd Ward voters can tell the difference (see Postscript).

The University is not purchasing land with the financial assistance of federal programs, and is not exercising eminent domain, as was done at the time of Urban Renewal. These purchases are not taking place at the height of the Civil Rights movement, when such actions were charged with political meanings and seemed to embody power relations that they no longer have.

Most unfortunately for the Woodlawn Myth of the Predatory University, the 3rd Ward purchases are taking place at the moment of a historic watershed, when inner cities have regained the interest of markets, imaginations, and entrepreneurs, and when smart, equitable urban development is seen to be a key to future sustainable habitation of our planet.

Garfield Green Line CTA Station (rebuilt 2001)

Any major revitalization of the south side wards around the University of Chicago will probably require the capital and involvement of the latter, in some form of public-private partnership that brings jobs to the neighborhood and builds on the efficiencies of existing urban infrastructure.

So let's put away the canned resentment and take advantage of an historic opportunity to get things moving down King Drive.

Either that, or the vacant lots in the 3rd Ward may collect garbage for another few generations.


Postscript

I was standing in the parkway of Garfield Boulevard taking these pictures of shuttered buildings, empty parking lots, and vacant land, when I was approached by a African American man about my age.

"You going to buy it?" he asked, pointing to the lot between King and Prairie.

"No," I said, "someone else already has."

"I hope they do something with it," the guy told me. "What we need around here are more jobs. These people want jobs. That building's been empty for 10 years. Someone needs to do something with it."

So I told him that the University of Chicago bought it, and some other lots around here, but that his Alderman Pat Dowell doesn't want the University to own land in her ward.

The guy didn't have a response to that. What he did say was that "we need development that pushes out the people who don't care about the neighborhood, and keeps the people who do."

MAC & the Hyde Park Rental Revolution

posted by chicago pop

Lobby of The Blackwood Apartments

5200 S. Blackstone

One of the biggest positive transformations in Hyde Park has been happening mostly under the radar for about 6 years now.

It hasn't involved the construction of new buildings. It hasn't involved Federal grants, City tax breaks, bailouts from the University of Chicago, or neighborhood activists laying down the law.

Most of the improvements we're talking about have been behind locked doors, in the form of new kitchens, modernized wiring, newly lit stairwells, central air, and restored historical and architectural details.

Detail of Grillwork, Blackwood Lobby

Since acquiring its first rental property in Hyde Park, MAC Property Management has sunk a whopping $200,000,000 in construction costs to renovate, restore, and add to the inventory of rental units to the neighborhood. This is all apart from the two projects slated by Antheus Capital, the private equity firm and parent company of MAC, at the Solstice location and at Village Center.

New Kitchen (with IKEA cabinets and granite counters) at MAC property 54th & Maryland

In Hyde Park, the result has been a net addition of 400 rental units since 2002, ranging from one bedrooms at $900/month to 2 bedrooms at $1,400/month, depending on the size and location. On average, this represents a rent increase of $300-500/month at a range of properties, many of which had deteriorated for decades under the former ownership of K&G Building Management.

Sidewalk Lighting on MAC building at 54th and Maryland

MAC Director of Community Development Peter Cassel, who took us on a walking tour of MAC's walk-up and high-rise properties, emphasized that when MAC acquired rental properties along Cottage Grove, Drexel, or the historical art deco Blackwood tower on East 52nd Street, many of the units were uninhabitable.

In the long-forlorn northwest corner of Hyde Park, where MAC's current activity is conspicuous, a few examples stand out. At the Drexel Grand (5220 S. Drexel) only 30 of the 64 units were occupied when MAC acquired the property. The gas had been disconnected to the entire building, and the previous owner had distributed microwaves to all the tenants as a substitute for gas stoves.

New Com-Ed Poles, Power Boxes, and Wiring at MAC buildings on 54th and Cottage Grove

Shortly after MAC acquired The Blackwood (5220 S. Blackstone) the 15 story deco tower completed in 1930, the company was contacted by the FBI and informed that 59 of the building's residents were suspected of involvement in the drug trade.

Primarily for this reason, according to Cassel, the building was half-empty. Similar dynamics are playing out on Ingleside, Drexel, and Maryland, where MAC is renovating historic buildings in an area that for decades had been viewed as a lost cause by both the University and the Chicago Police.

Failed Condo Conversion in West Hyde Park
(Not a MAC Property)

On Cottage Grove, MAC is is building on the favorable geography of West Hyde Park. A cluster of 3-story walk-ups face Washington Park, offer secure parking, and direct access to CTA Cottage Grove and Garfield Lines for workers commuting to the South Loop or downtown. For medical technicians and others employed at the U of C Medical Center -- a major target for the new rental units -- work is just steps away.

West Hyde Park's Front Lawn: Washington Park (Renovated MAC buildings on either side of 54th Street and Cottage Grove)

Since the Second World War and the subsequent 60 year boom in suburban development, the market in residential real estate has operated on short time horizons. Malls, residential subdevelopments, and the familiar landscapes of suburbia were investments expected to generate returns within a 5 to 10 year period. For this reason, they were built quickly and cheaply. Decades later, it shows.

It wasn't always this way. Many of the greatest achievements of American urban building date to the pre-WWII period, when real estate was a long-term asset class, something expected to garner value over a period of several decades.

In many ways, MAC -- a private equity firm that is also investing heavily in other historic, inner city neighborhoods (such as another Hyde Park, in Kansas City, Missouri) -- represents a return to this older model of real estate investing.

One of the up sides of this model is that, relieved of the pressure to report quarterly earnings growth to anxious Wall Street investors, a company like MAC can take its time to realize a return.

View from 13th Floor of the Algonquin rental property

In MAC's case, that horizon is about 15 or 20 years down the road. Until then, MAC's financial bets are tied in part to the success of its rental portfolio, the market for which has already responded favorably throughout the neighborhood. MAC won't be flipping these properties anytime soon.

The down side is that this activity may add to the pressure for low-rent, off campus student accommodation as much as the boom for condo conversion did. K&G answered that need for many years, and it's not clear that it was good for the neighborhood as a whole.

The University and Divisions may need to take the higher rents into account when they formulate admissions and funding packages for graduate students, the biggest segment of student renters. And MAC, which has clearly gotten very big, very fast, needs to stay on top of its work orders and customer service, both of which have generated many complaints from student renters.

For the University, spending more for housing allowances to float fewer students through graduate school may ultimately be a better deal than paying for a police force to protect them in the slum conditions that have historically housed them.

Until then, MAC is rounding out the housing market for working professionals, and we're starting to see the results.

A Bull of Khorsabad Guards the Blackwood Lobby

Looking Back on 47th Street: Risk and Corruption on the South Side

posted by chicago pop

Lest the title of this post mislead anyone, I'll state it upfront: I know of no evidence that corruption of any sort played a role in the saga of Lake Pointe Park Shopping Center, the retail shopping mall that for a few years housed the Hyde Park Co-Op's ill-fated 47th Street Store.

But the Chicago Tribune's front page story detailing the Clinton campaign's effort to tie Barak Obama to Antoin Rezko, alleged south side slumlord and Springfield influence-peddler, got me thinking about just how dicey the world of south side development is. How big the risks are, and how easily the plans go bust. Like they did for the Co-Op.

I don't think Obama's ties to Rezko, who is facing federal indictment, amounted to anything illegal, or even unethical. But if you track the players involved in any of the residential or commercial developments in near south side neighborhoods over the last decade or so, a small set of names and organizations turn up again and again, linked to and including Rezko. It makes you wonder if they should be.

In a conspicuous number of cases, someone running with this small pack gets busted for doing something illegal. Or called by the Trib or Sun-Times for deals that no one can crack, but which come across as suspicious. It seems hard to keep your hands clean in real estate anywhere, and South Side neighborhoods are no exception.

Take one of the partners originally responsible for developing Lake Pointe Park, the Fund For Community Redevelopment and Revitalization, a Woodlawn-based, non-profit community development corporation (CDC) that originally came together with a for-profit developer to build the shopping center at 47th and Lake Park.

During the final agony of the Hyde Park Co-Op, very little media attention was paid to the details of the deal at 47th, who had made how much, and who was still cashing checks from the Co-Op and Certified to pay for an empty store.

The Fund for Community Redevelopment and Revitalization (FCRR) was founded by the prominent civil-rights era activist, Arthur M. Brazier, who together with Leon Finney has founded a number of similar redevelopment funds centered in the Woodlawn area.

As a partner in the Lake Pointe venture, the FCRR was able to obtain a $2,000,000 combined grant from the City of Chicago and HUD, and approximately $1.5 in loans from a national non-profit redevelopment organization to undertake the project at 47th Street in the mid 90s.

While the Lake Pointe Park center neared completion in the late 90s, the FCRR was at the same time hammering out deals with Antoin Rezko's development firm, Rezmar, on a number of south side affordable housing rehabs. To stick only to those deals involving the FCRR, (leaving aside deals between Rezmar and sister organizations of the FCRR also headed by either Brazier or Finney), FCRR signed on with Rezmar in 1997 to rehab affordable housing units on South Ellis and East 46th Street.

In 1998, the FCRR again joined with Rezmar to obtain a $3.8 million loan from the City to redevelop two buildings on South Michigan Avenue, and South Kenwood. Rezmar ceased managing any of these properties when it ran into financial difficulties, while the City foreclosed on several others managed by Rezmar with different CDCs. (Tim Novak, "Rezmar Deals Involving Davis Miner Law Firm." Chicago Sun-Times, April 23, 2007).

A few years later, Allison Davis, a former board member of the FCRR and a founding partner at the prestigious civil rights law firm where Obama worked (Davis Miner Barnhill & Galland), and which handled legal work for projects involving Rezmar, set up his own development deal in Woodlawn on East 63rd Street. The Columbia Pointe mixed-income residential project was initiated with grants from the City for infrastructure, and several parcels of City-owned land were donated to the project. (Tim Novak, "City land for Davis' 2 sons." Chicago Sun-Times, Nov. 11 2007. p. A-16)

Here again, Brazier and Finney show up as backers, together with Vince Lane, former head of the Chicago Housing Authority. In 2001, Vince Lane was found guilty of lying to obtain bank loans to rescue a failing supermarket he had developed at 76th and Racine. Lane was sent to prison for 2 years. (Steve Warmbir, "Ex-CHA Chief Found Guilty of Lying to Banks for $2.5 Million in Loans." Chicago Sun-Times, March 22, 2001, p. 1).

In the Columbia Pointe project, according to Tim Novak at the Sun-Times, Davis sold "the biggest, most expensive house" to his son Jared, for $386,000 in a "mixed-income development project subsidized by Chicago taxpayers." (Novak, "City Land for Davis' 2 Sons")

Just a few months ago, Novak reported that:

Davis and his partners -- including his son Jared and Cullen -- have gotten more than $100 million in taxpayer subsidies to build and rehabilitate more than 1,500 apartments and homes, primarily for the poor. His deals include a massive redevelopment of the Chicago Housing Authority's notorious Stateway Gardens...Davis and his partners have made at least $4 million in development fees over the last decade. (Tim Novak, "How reform-minded City Hall critic bacame a cozy insider." Chicago Sun-Times, Nov. 11, 2007).

It get's confusing fast, and everybody has done deals with everybody. Brazier and Finney have been involved with multiple shady characters. There is money to be made from City and Federal grants to build housing and commercial developments for the poor.

Given the number of these projects that went bad, from Vince Lane's supermarket on 76th and Racine, to Antoin Resko's numerous unheated, below-code, and foreclosed rehab rentals in neighborhoods surrounding Hyde Park, it's not surprising that the Lake Pointe Park shopping center lost its anchor store.

But the fact that the Co-Op was subleasing from Certified, rather than leasing directly from the landlord, is probably why the mall managed to stay afloat at all when the Co-Op went belly-up, and not wind up like Lane's supermarket on 76th -- another casualty of the risky and shady world of south side development.

It also makes me think that Brazier and Finney must have the same amazing knack as Mayor Daley for working on a daily basis among big-time crooks, while somehow managing to keep their hands clean.