29-May-18 – The defendant in a lawsuit over the failed Chicago Spire project says a 2014 Chapter 11 bankruptcy settlement included an agreement by the developer not to sue them.

National Asset Management Agency, a publicly-funded banking agency in Ireland, has asked a United States District Court to let a bankruptcy judge weigh in on whether the lawsuit may proceed.

The agency is being sued for $1.2 billion by Garrett Kelleher, who introduced the Spire to Chicago and the world in 2006. The 2,000-foot residential tower, designed by world-famous Spanish architect Santiago Calatrava, would have been built on a 2.2-acre site in Streeterville between the Chicago River and Ogden Slip.

The $1.2 billion is for expenses incurred to design and market Chicago Spire, plus lost profits from its development. According to the lawsuit filed on February 27, Dublin-born Kelleher and his team traveled around the world, pre-selling 370 of 1,200 condominium units at an average cost per square foot of $1,400. Most of the $300 million spent on the project – for design, construction, and marketing – came from Kelleher’s company, Shelbourne North Water Street Corporation, but $92 million came from Anglo Irish Bank, based in Dublin.

(Left) Wider view of former Spire site, seen from Lake Shore Drive Bridge.

After the collapse of real estate markets worldwide in 2008, Anglo Irish Bank, says Kelleher, refused to continue funding the Spire project. In 2010, Kelleher learned that loans he had personally guaranteed had been transferred to National Asset Management Agency, which had been formed after the financial collapse to handle Irish real estate investments. Kelleher says he was misled about the status of the loans, specifically that he would not be pursued to make good on the guarantee.

National Asset Management Agency sold the loans for about one-third their value to Related Midwest in Chicago, costing Irish taxpayers about $54 million, for which the agency is now suing Kelleher.

In her motion filed on May 11, Faye Feinstein, an attorney for National Asset Management Agency, says the request for $1.2 billion is “insupportable” and Kelleher “has decided to do what many borrowers and guarantors do in order to get out from under debts they have voluntarily incurred – turn the tables and sue the lender.”

She says Kelleher’s lawsuit is an attempt to “gain the upper hand” in the lawsuit against him.

2014 settlement included agreement not to sue

Attorneys for National Asset Management Agency say in a 2014 Chapter 11 bankruptcy settlement, Shelbourne North Water Street Corporation emerged with a plan of reorganization and an agreement not to sue.

“The settlement agreement contained a broad waiver, release, and covenant not to sue,” says Faye Feinstein (right), of the Chicago law firm Quarles & Brady LLP, in her motion, and specifically not to sue National Asset Management Agency over the Spire loans. She says Shelbourne “has now brought the exact claims that it waived, released, and is enjoined from pursuing.”

National Asset Management Agency has asked a federal judge to move the case to U.S. Bankruptcy Court. They have also filed a motion to dismiss the complaint.

Related Midwest, meanwhile, has 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 project needs zoning approval by the city and financing.