Feb. 17--An affiliate of Related Midwest is opposing the bankruptcy financing plan proposed by the Chicago Spire's developer, arguing that among other things, the funds carry a "pawn-shop like" interest rate.
RMW Acquisition Co. LLC, which owns the delinquent debt on the long-stalled project, also revealed in a court filing Monday that it offered debtor-in-possession bankruptcy funds to Shelbourne North Water Street, L.P. in December.
It was only on Feb. 10, according to RMW, that it was told that Shelbourne, headed by Irish developer Garrett Kelleher, had opted to partner with Northbrook-based Atlas Apartment Holdings LLC, and receive up to $250,000 in financing from Atlas to pay claims and emerge from bankruptcy protection.
While that investment could help satisfy claims in the bankruptcy case, Shelbourne and Atlas would then have to find additional financing to restart construction on what was to be a $1.5 billion, 2,000-foot twisting condominium tower designed by Santiago Calatrava at 400 N. Lake Shore Drive.
Progress on the project ground to a halt in 2008 when Kelleher was unable to secure additional financing for the Spire. Last summer, Related, whose other Chicago projects include high-end condo and apartment buildings, acquired the delinquent debt on the project. In October, it and other debtors forced Shelbourne into bankruptcy.
In its objection filed with the court Monday, Related said it had negotiated with Shelbourne to provide up to $1 million in bankruptcy financing that carried an 8 percent interest rate and few other conditions.
Its objection also notes that under the proposed deal with Atlas, if certain deadlines are not met, Atlas could end its investment, and could leave the Spire's receiver unable to pay the March property tax installment.The Atlas financing plan "makes no economic sense and the debtor is proposing it for one reason only: to lock up this bankruptcy case in favor of the non-competitive, non-transparent plan process contemplated by the Atlas Investment Agreement Motion," Related's filing stated.
The Atlas proposal "provides for exorbitant fees, a pawn-shop like 15 percent interest rate with an even higher 20 percent default interest rate," and among other things, "an inadequate $250,000 loan commitment which is projected to run out midway through this case, inviting unnecessary chaos when the estate can least afford it."
A spokeswoman for Related Midwest declined comment. An attorney for Shelbourne said the company is "reviewing the objection and will respond to the court."
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