The Wilmette building that advocates of saving Evanston’s Civic Center point to as a model is faced with a foreclosure lawsuit.

Crain’s Chicago Business reports that a Milwaukee bank, M&I Marshall & Ilsley, has filed suit to collect nearly $19 million on unpaid loans to developers of the former Mallinckrodt College building at 1041 Ridge Road.

After Loyola University closed the campus in 2001, the building was acquired by the village which sold it to Oculus Development LLC and the Pickus Cos., which converted it to senior citizen condos.

Crain’s says only about half the condo units in the Mallinckrodt have been sold.

After years of efforts to find a formula to fund construction of a new Civic Center by selling off the current one — a former Catholic girls’ high school — to developers, Evanston aldermen this year voted to stay put and make repairs to the building’s roof.

Opponents of the move had used the Mallinckrodt as an example of successful restoration of an aging school structure — suggesting that it proved both that the city should stay in the Civic Center and restore it for its own use or, failing that, should sell it to a developer who would preserve the building.

Bill Smith is the editor and publisher of Evanston Now.

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14 Comments

  1. Bill – the two issues are not related –
    Bill – the economy is effecting the sale of property all over – it is clear the economy models developers used for many project are not working since there are few buyers. There are also condos buildings in Evanston that are now going into foreclosure – I heard of a property in the 7th ward which appears to be heading there. Also I looked at the Crain site – using your link – there are many articles there on foreclosures with a list of large projects through out the Chicago area. ( The question Bill we should all be asking is how the lack of sales in these developments is this going to effect the existing TIF’s and the city of Evanston’s ability to pay them off?)

    I do not see the comparison with the issue of the Civic Center, they have no relation. That is it make no difference on what the city does or does not do as far as selling the property for condos.

    By the way what would have happen if the city had sold the property to developers – with the proposed plan of developing it into a condo development – it most likely would be sitting there as a vacant lot today. The ecomony would have stop the sales there also just like at the Mallinckrodt condo project.

    Given the city would have created some sweetheart deal with the developers – we taxpayers might have been suck with the bill if the project went into foreclosure!

  2. senior foreclosure
    Happy New Year Junad,

    The discussion from the Civic Center group focussed primarily on costs related to construction. One would have to get much further in to the construction cost side to see if the development’s numbers held up. At 50 % sold, it seems that foreclosure is a drastic move on the part of the bank. It wouldn’t surprise me that costs associated to the rehab/refit probably increased.

    1. foreclosure
      Hi Ron

      You would know better than most of us about the issues developers are now facing with the economic conditions. While I have no data I would suspect many projects in Evanston are facing problems.

      In speaking with someone who sold off his project – he told me it would have been better for him to burn it down, thus I suspect many developers are facing losses.

      I would think the senior project was a valid project yet the economy got the better of it? It appear the developers involved were well known and had experience and a track record in sucessful projects. As with any rehab costs will go up due to unknowns.

      The interesting issue is were do we go from here in Evanston with future development – and the role the city will have to face to start the projects coming back in a few years.

  3. On the contrary: Mallinckrodt’s demise supports saving the CC.
    Bill –

    As Junard has suggested, the demise of the Mallinckrodt exemplifies why staying in the CC made sense. If the city had proceeded, banking on revenue from the sale of the land to partially finance a new CC, we would be half in and half out with a developer that probably would walk.

    On top of that, do you think getting financing to build a new CC in this terrible credit market would have succeeded?

    The reason we pointed to the Mallinckrodt was two fold – the cost of rehab was a lot less expensive than projections floating around for the CC, and secondly, if the city did proceed, rehabbing an old building was something that was possible. The viability of such a development was not what we addressed.

    Given the economy, as a city we ought to feel lucky that we did not proceed with moving the CC – and the infamous Tower would also be a big hole in the ground.

    1. Contrary to what?
      Hi John,

      You incorrectly assume that the story was meant as a some sort of criticism of the idea of renovating the Civic Center.

      It was simply meant to report the current status of a project that happens to not be in Evanston but is of note to people in Evanston because of its frequent mention in connection with the Civic Center.

      Bill

    2. 50 Hoovers
      John Kennedy asks:
      “On top of that, do you think getting financing to build a new CC in this terrible credit market would have succeeded?”

      I think that the City could obtain a good interest rate right now, land acquisition costs would be low right now, and there are plenty of contractors willing to work for lower costs.

      More importantly, this is NOT the time for cutbacks in government spending. It is time for more spending. Not for wasteful patronage jobs or handouts to Blago’s friends, but for infrastructure improvements.

      I like to read the New York Times columns by Paul Krugman, most recent winner of the Nobel Prize in Economics. Some of his recent columns have discussed the need for increased federal spending to pull this country out of the recession.
      In his column of Dec 28, 2008 (“Fifty Herbert Hoovers”), Krugman wrote:
      “It’s true that the economy is currently shrinking. But that’s the result of a slump in private spending. It makes no sense to add to the problem by cutting public spending, too.

      In fact, the true cost of government programs, especially public investment, is much lower now than in more prosperous times. When the economy is booming, public investment competes with the private sector for scarce resources — for skilled construction workers, for capital. But right now many of the workers employed on infrastructure projects would otherwise be unemployed, and the money borrowed to pay for these projects would otherwise sit idle.

      Krugman goes on to point out that state and municipal governments are not in a position to pay for all of the desirable – and necessary – projects that should be done, and concludes:
      “And why should investments in infrastructure, which will serve the nation for decades, be at the mercy of short-run fluctuations in local budgets?

      That’s for later. The priority right now is to fight off the attack of the 50 Herbert Hoovers, and make sure that the fiscal problems of the states don’t make the economic crisis even worse.

      The solution, of course, is for the funding to be at the federal level. Building a real city hall to replace the crumbling old schoolhouse ‘Civic Center’, which is falling apart and not worth repairing, is just one of hundreds of infrastructure projects that are needed in Cook County. ( Fixing the CTA, extending the Metra UP line to Milwaukee are my personal favorites).

      Take a look at our post office on Davis St. It too was built as part of a giant federal effort to stimulate the economy, and it has served well for 70 years. It is much more desirable than the 708 Church Building, the ‘Civic Center’, the Dawes House, or any of the other old worthless buildings that the activists want to save. And people actually use it. Now, in the greatest economic crisis in 70 years, we should follow the example of FDR and enhance our infrastructure.

      So John Kennedy’s conclusion:
      “Given the economy, as a city we ought to feel lucky that we did not proceed with moving the CC – and the infamous Tower would also be a big hole in the ground.”
      is incorrect. Given the economy, it is important – now more than ever – that we continue with infrastructure improvements like a modern civic center , and encourage private investment (like the Tower, or commercial development at the old Kendall lot, current Civic Center lot, or Eastwood & Central).

      If Mr. Kennedy’s objection is that the infrastructure improvement should be funded by the Federal government and not the city, then I would agree with him. If, however, he is opposed to the idea of infrastructure investment during a recession – then he too is advocating the same failed economic policies of the Hoover administration.

      1. Mr Who Knows What? does not understand government
        Would Mr. Who Knows What? (MWKW?) replace the “50 Hoovers” with one Stalin?

        Extracting one “example”, the Post Office, is no demonstration of the efficacy of a government induced economy. If he would go beyond the building and look at the Post Office service itself, he would see that only the competition from FedX and UPS finally made it somewhat efficient. The internet is already taking its toll.

        Given the financial imbroglio that is Evanston finances, MWKW? would dig the hole deeper by emulating California, New Jersey and the other “50 Hoovers”? Government spending increases serve mostly to load us and our descendants with even more debt. I assume MWKW? smiles with satisfaction when he receives his ever larger tax bill?

        BTW if our esteemed fountain of NPV knowledge would examine the Hoover/FDR era, he would discern that FDR gummed up the works as well, and only the onset of WWII extracted the US from the Depression — it was not the CCC or WPA. (BTW I am not endorsing war as a solution)

        How about trimming government, debt and taxes?

        1. FDR and the Depression
          Vito says:
          ” FDR gummed up the works as well, and only the onset of WWII extracted the US from the Depression — it was not the CCC or WPA. “

          I’m not sure what you mean by this, Vito. Are you repeating the myth that FOX “News” likes to spread, that FDR’s stimulus program made the depression worse or didn’t help? Krugman has repeatedly debunked that myth. FDR’s originial stimulus did improve the economy, but in 1937 he started listening to the ‘balance the budget’ and ‘cut debt’ crowd, and things got worse.

          “Extracting one “example”, the Post Office, is no demonstration of the efficacy of a government induced economy. If he would go beyond the building and look at the Post Office service itself, he would see that only the competition from FedX and UPS finally made it somewhat efficient. The internet is already taking its toll.”

          Bashing the USPS is always fun for the right-wing, but really their service is very good. 43 cents to mail a letter from Maine to Alaska. Mailboxes and post-offices everywhere across the country. I have had no problems with the USPS. Of course, we could try privatization mail service, like they did in Britain:

          http://www.telegraph.co.uk/news/uknews/1933338/Royal-Mail-privatisation-'hurts-customers‘.html

          Anyway, Vito, as someone who pretends to care about NPV, certainly you realize that the present economic downturn or cash shortage is irrelevant to determining whether the City should build a new Civic Center. What matters is the long term – that is the whole basis of NPV, summing up the present values of future costs and income. We are now in a situation where land costs are cheap, interest rates are low, contractors are willing to work for less, and building materials are inexpensive. While it is true that the value of the current Civic Center site is also dramatically decreased, the important thing is to make that land taxable.

          So going back to John Kennedy’s argument, that the city should not be spending in this economic downturn – it seems that the anti-development crowd always finds an argument against change or development:

          The economy is strong? Well, we need to slow down this out of control development.
          The economy is weak? Can’t take the risk of more development.

          The City has no money: Can’t afford a new Civic Center.
          The City has money: We can afford to fix the current Civic Center.

          No empty storefronts or offices: Can’t tear down 708 Church because those tenants have nowhere to go.
          Lots of empty storefronts and offices: No need for more construction – let’s keep 708 Church.

          Building the tower will attract lots of cars downtown, creating traffic problem.
          Tearing down 708 Church will result in fewer cars coming downtown, creating loss in parking revenue.

          The condos in the tower will will become a new ‘Cabrini-Green’.
          Only rich people will be able to afford the condos in the tower.

          We need to consider NPV, which takes into account the cash flows in the long-term.
          We need to do what is best in the short term, because we need the money now.

          1. MWKW? arguments are for leaving it for tomorrow
            For the supposed “expert” on NPV you seem to always be willing to take on debt and leave the reckoning to the future. Your advice has been well demonstrated by the pension fiasco. The city has “money” only in the sense that it can create obligations. We already are over $146 million in the hole with the pensions, which means that making that up and satisfying existing obligations will mean paying in over $500 million by 2033. I suppose adding another $50 to $60 million for a Civic Center is peanuts to you.

            As for the Tower, we have shown it to be a tax loss through 2019. Maybe we can use Trump as a consultant to tap more money.

            There is always the example of San Diego.

          2. More bad news on the city tax increase.
            Vito – the pension numbers were generated prior to the market going down. Remember some of the so called advisers were recommending that the fund was to limited in its investments.

            That is the limit on stocks held by the funds were too restrictive. One bright side to this is the funds were not fully into stocks – thus the decrease in value is now less.

            But the city is not using the new numbers ( at the two prior budget hearings they were talking about waiting until January ) – my guess is we now would owe – another 10% to 15% to our already growing payments? That is if we plan to ever even pay the 1/2 billion the funds want by 2033.

            Thus the 4.9% tax increase, with the drain down of the reserves, increasing pension debt and decreasing revenues looks all the more bleak, if council member continue their refusal to manage the city by cutting staff and programs.

          3. tower projections
            Vito says:
            “As for the Tower, we have shown it to be a tax loss through 2019. Maybe we can use Trump as a consultant to tap more money.

            Are you referring to the ECRD “analysis”? Does anyone take that seriously?

            Bill has already shown, using ECRD numbers, that in the LONG TERM (which is all that matters to those of us who are connoisseurs of NPV), the Tower would have been a net gain to the City.

            But of course, that was before the economic collapse.
            It would be interesting to see the analysis done again..especially since the ECRD’s numbers were assuming, incorrectly, that 708 Church would continue to generate sales tax revenue from stores such as Uncle Dan’s , and that if 708 Church were torn down this revenue would be lost to the City. [ As you know Vito, Uncle Dan’s has left the 708 Church site for another location in downtown Evanston. I believe that Mr. Who Knows did point out that the stores in 708 could just be relocated to other sites within the city, and as usual I was correct. ]

            A new analysis would have to take into account lower sales tax revenues in the SHORT TERM from empty stores ( Uncle Dan’s, shoe repair, photo processor) and remaining stores (Radio Shack, Williams), and as there are plenty of empty stores in Evanston now, we would have to question ECRD’s assumption that stores would be unable to find new locations in Evanston.

          4. Mr WKW? just refuses to accept reality
            FYI we sat down with the past City Manager and staff and went through the analysis. They did not dissent.

            Has it dawned on you that until the TIF expires in 2019 there would be no additional revenue going into the general fund beyond the present tax levy?

            The sales tax revenues are peanuts compared to the property tax revenue. Do you really expect the tax revenue from retail sales to be even better now, after the financial meltdown?

            Given the number of proposed developments that are now empty lots, do you think that 708 would have fared any better? Once the building was down, the tax revenue would drop to just that for the land alone, the improvement having been demolished. No increase in tax revenue would have been available, even for the TIF, until the tower was built, units sold, assessed, and levied. What is the NPV of that?

            Given that 50 to 100 years from now, the near term tax loss would be long gone. Unfortunately the city’s financial situation is NOW and we need to do something to alleviate the financial fiasco in the next few years — not the LONG TERM.

            MWKW?, since you seem afraid, or embarrassed, to identify yourself, this is my last response. You may continue your supercilious rants and strutting of your NPV expertise with others. Perhaps you can offer your financial acumen to the City, it could not be worse than what prior consultants have given.

          5. supercilious rant
            Vito says:

            “The sales tax revenues are peanuts compared to the property tax revenue. Do you really expect the tax revenue from retail sales to be even better now, after the financial meltdown?”

            I agree, sales tax revenues are peanuts compared to property tax. But remember, Vito, that the ECRD analysis emphasized the importance of the sales tax revenue from the stores.

            “Given the number of proposed developments that are now empty lots, do you think that 708 would have fared any better? Once the building was down, the tax revenue would drop to just that for the land alone, the improvement having been demolished. No increase in tax revenue would have been available, even for the TIF, until the tower was built, units sold, assessed, and levied. What is the NPV of that?”

            Are you asking me how to compute NPV? I assumed that you were familiar with the topic. Like you say in the paragraph above, “no increase in tax revenue…until the tower was built, etc.” . So to compute the NPV,we would estimate the revenues after the tower was built, and discount them to compute their present value.

            That is the whole point of NPV. Future revenues and expenses, along with present revenues and expenses, can be summed and compared by discounting the future cash flows. If you are saying that we should focus entirely on the short term, you are denying the whole validity of the NPV approach.

            I agree, Vito, there is no point in continuing this discussion, as I have nothing to say to someone who doesn’t believe in NPV. It is like arguing with a fundamentalist about evolution, or arguing with the guy on Michigan Avenue about the Russian spies infiltrating the US, or arguing with some conspiracy theorist about whether the moon walk was a fake.

      2. Federal infrastructure spending and the Civic Center
        Mr. Who –

        This country needs trillions of dollars of infrastructure spending. There are numerous projects to be done.

        I ofcourse support the idea of spending on infrastructure. The federal government has been funding projects for years. A new big spending program is fine.

        The problem is how they are going to get it done. The government officials are now looking for short term projects to jump start the economy. That is I have heard numbers for projects in 90 to 180 days.

        This approach is not very realistic.

        Right now if a government unit has a project, that is designed and ready for construction I would suspect they would have a high chance to get funding.

        There are many projects here in Evanston that need to get done – such as all the bridges on the CTA tracks that have not been done. They are high priority.
        Also the new CTA station in south Evanston could be done with federal funds, But these projects are not 90-180 day projects,

        Right now if we wanting to get some quick funding I would suspect the best projects would be to resurface all the roads in town that do not need a be rebuilt.
        That is they could meet this 90-180 day time frame in the spring.

        To rebuild the Civic Center – buy the land, plan a project and get it built given the city of Evanston incompentance by our public officals would take about four years. ( if a company in the real world had to do the job it would still take probably two years in a best case senario )

        Who you should remember our public officials are into wasteful patronage jobs – such as the employ Evanston residents program. They are not to interested in getting the public work jobs done here or do they even understand what they are doing.

        Even with these so called attractive rates for construction, which are not going to last too long – the city of Evanston still does not have the funds to build a new Civic Center.

        Who – basing assumptions on a program not even started by the Federal Government on what and how spending is going to occur – is not very reasonable – but given the time to rebuild the Civic Center as a new building it is not a likely project to obtain any Federal Funds.

        Who on a final note the City is moving into Crisis management on the budget they are draining down the reserves – so I do not think they are in any position to fund an new expensive capital project.

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