(Above) Chicago Spire construction site in May 2008. Photo by Ryan Kirby. (Click on image to view larger version.)
15-Mar-19 The road to redemption for the developer of the failed Chicago Spire will not go through Chicago.
A federal judge has dismissed a lawsuit filed by Garrett Kelleher and his company, Shelbourne North Water Street Corporation, against National Asset Management Agency, an Irish banking agency he says derailed the project.
United States District Judge Andrea Wood says the case lacks subject matter jurisdiction, so the court lacks the authority to hear the case against the Irish institution.
Attorneys for Kelleher had argued the agency waived immunity from the court because its foreign assets, per Irish law, are governed by foreign law, but Wood rejected the argument, saying there is simply no basis for the court to find that defendants waived sovereign immunity by contract.
When the Chicago Spire project started in July 2006, it was hoped the 2,000-foot-tall tower, designed by architect Santiago Calatrava, would be the tallest residential building in the world. By early 2008, the project had a design, foundation, and substructure at a cost of $300 million.
Financing included a $90 million loan from Anglo Irish Bank Corporation that Kelleher had personally guaranteed. But with the worldwide financial crisis of 2008, Anglo was unable to continue funding the project, Shelbourne was unable to find alternate funding, and development of the Chicago Spire stalled.
(Left) 3D model of Chicago Spire.
Agency formed to handle Irish investments after worldwide collapse
In late 2009, the government of Ireland created the National Asset Management Agency to acquire property development loans from Irish banks, such as Anglo, in return for government-backed debt bonds.
Shelbourne started working with NAMA to figure out a way to resume development of the Spire but the agency, says Shelbourne, rejected numerous proposals.
Finally, in September 2011, Shelbourne thought it had a deal with NAMA to release Kelleher from all personal guarantees and allow Shelbourne to purchase the Spire site for less than the full amount due on the loans.
Shelbourne even found an investor to advance about $92 million to redeem the loans and allow Shelbourne to finish construction. But in July 2013, NAMA sold the Spire loans, with Kellehers personal guarantees attached, to RMW Acquisition Company, which does business as The Related Companies, for about $35 million. National Asset Management Agency, on behalf of Irish taxpayers, is looking to Kelleher to make up the $54 million difference.
In addition to the $90 million, companies owned directly or indirectly by Kelleher owed about $510 million to Anglo and $600 million to other Irish banks.
Shelbourne said it was out $1.21 billion in damages. Its lawsuit claimed tortious interference with contract and accused NAMA of leaking confidential information and destroying written communication of former employees.
National Asset Loan Management, a private company based in Dublin, was a co-defendant in the lawsuit.
In her memorandum and opinion filed on March 14, Judge Wood argued that even if Shelbourne had been able to pay off its loans, there still was no guarantee that the Spire would be completed.
Shelbourne still would have had to find the funds to actually complete construction of the Spire, wrote Wood (right).
The Chicago office of The Related Companies, Related Midwest, proposed building two slender towers on the site, a 1,100-foot tower containing 300 condominium units and a 175-room hotel, and an 850-foot tower with 550 rental units. The plan was rejected by 42nd Ward Alderman Brendan Reilly but on February 21, the citys Plan Commission voted to extend the sites zoning rights for another year, giving Related Midwest more time to revise its plan.