The Chicago Spire debacle
What really happened with developer Garrett Kelleher and the Chicago Spire.
The builders of skyscrapers are by nature bold and brash, with their manhood on full display on a city skyline. The elegant Flatiron Building in New York symbolizes the hubris of its designer, Daniel Burnham, and his credo: “Make no little plans.” The sleek IBM Building in Chicago exudes the confidence of architect Ludwig Mies van der Rohe, who had the impudence to declare, “God is in the details.” The various Trump Towers scattered across the world characterize the potency of Donald Trump, who has numerous progeny made of brick and mortar in addition to his five human offspring.
Garrett Kelleher wanted to be a part of the builders club. The Irish-born developer came to Chicago in 2006 with plans to construct a 150-story condominium high-rise on Lake Michigan that would be the tallest skyscraper in North America and also the tallest residential building in the world. His gleaming structure, called the Chicago Spire, would be a swirling glass and steel tower designed by the renowned Spanish architect Santiago Calatrava. It would be the focal point of the Chicago skyline.
Kelleher, who had previously only built modest high-rises less than 20 stories in Europe, sized up the competition: The Trump International Hotel and Tower, under construction at the time, was going to be an impressive 96 stories. Nicknamed “Big John,” the John Hancock Center was huge at 100 stories. The Sears Tower (now Willis Tower), at 110 stories, was even bigger.
But Kelleher had dreams of building the biggest. “There was a certain sense of the phallus effect here,” says Alexander Lehnerer, an architect, urban designer and professor at the University of Illinois at Chicago School of Architecture. “The Spire would be bigger than the rest and kind of dominate the city’s skyline.”
Today, all Kelleher has to show for his dreams is a gaping, 76-foot-deep hole in the ground. The Spire construction site, where Lake Shore Drive meets the Chicago River in the Streeterville neighborhood, has been idle for more than two years, and is littered with garbage and abandoned trailers. The hole dug for the building’s foundation is surrounded by orange cyclone fencing and caution signs. Kelleher and his company, Dublin-based Shelbourne Development Group, are the subject of lawsuits and liens on the 2.2-acre site for unpaid bills, bank loans and property taxes totaling at least $100 million, and the chances the Spire will ever be built grow slimmer each day.
Instead of having the biggest edifice in town, Kelleher has the largest orifice. And the guy gloating the most is none other than Trump, who from the beginning scoffed at the Spire, especially when it stole the spotlight from his Trump Tower, which was being built just eight blocks west.
“I predicted [the Spire] wouldn’t be built, and I was right,” Trump says. “Only I had the vision and resources to get it done and now my building is the biggest to be built since Sears Tower.”
Part of Kelleher’s misfortune was beyond his control, Trump admits. “I had good timing. I got my financing before the market collapse,” he says, although he, too, is feeling the pain of a weak economy, with one-fourth of Trump Tower’s condominiums still unsold.
Trump also takes a dig at Kelleher’s judgment as a developer. “It’s an impractical building and the location is only so-so,” Trump says. “Who’d want to live there?”
What exactly Kelleher thinks about the remarks of Trump and other critics is difficult to ascertain; he’s ensconced back in Ireland and isn’t taking calls. His Chicago-based attorney, Thomas J. Murphy, isn’t talking either.
How the Chicago Spire would have compared to the largest buildings in town
150 stories Chicago Spire
110 Willis Tower
100 John Hancock Center
96 Trump Tower
The silence is in stark contrast to the fanfare surrounding Kelleher when he assumed control of the project in July 2006. The Chicago Spire was originally the dream of Christopher T. Carley, CEO of Fordham Company, a Chicago development firm. In 2005, Carley commissioned Calatrava to design the tower, but a year later, after Carley was unable to secure financing, he sold it off to Kelleher’s Shelbourne Development. (The Fordham Company phone number is now disconnected.)
Having assembled a $2 billion real-estate portfolio in Europe, and encouraged by rising real-estate prices at the height of the housing bubble, Kelleher was confident he could finance much of the project himself, and proceeded with the Calatrava design. As envisioned by the architect, the Spire would rise from the ground in a twisting fashion, symbolizing a smoke plume that rose from a campfire of the land’s original Native American settlers. Calatrava said the design also resembled the rounded sea shells he carried with him on his travels. Detractors jokingly said it looked like a giant drill bit.
The exterior wasn’t the only attractive feature. Inside, each condominium would boast ten-foot-tall ceilings with curved windows offering panoramic views of the city and Lake Michigan. The condos would be finished with hardwood floors, granite countertops, crafted wood cabinetry and stainless-steel appliances. Common areas on floors four through seven would feature a swimming pool, fitness center with a basketball court, climbing wall and golf simulator. There would be a library, movie theater, game room and private dining rooms. The entrance would feature a five-story-tall translucent lobby measuring 15,000 square feet.
To tout his new $2 billion project, Kelleher made a big splash, spending $10 million to open an extravagant 20,000-square-foot sales center in NBC Tower. The 18th-floor center offered potential buyers two fully decorated condominium models, and a chance to look down at the nearby construction site at 400 North Lake Shore Drive.
There were lavish parties and presentations as Shelbourne sought to attract attention and buyers both locally and around the globe. One notable event was a September 2007 party in Millennium Park, where 500 Chicago luminaries were feted with food and drink and listened to speeches by Kelleher and Calatrava. Shelbourne Development also staged a traveling road show to sell the Spire in 15 cities across Europe, Asia and South Africa, including Dublin, Moscow, Singapore, Dubai and Cape Town.
“The Chicago Spire has captured the imagination of astute buyers in the U.S. and around the world,” Kelleher said in a press release at the time, “confirming that the city of Chicago is a world-class place to visit, live and invest.”
There was some early success. The Spire’s $40 million penthouse, a two-story, 10,000-square-foot unit with a 360-degree view of the city, was sold to Ty Warner, the creator of Beanie Babies. The most modest condos were selling for $750,000 each, and by mid-2008, deposits had been placed on a third of the Spire’s 1,194 units.
James B. Weber was one of those buyers. A former minor-league player for the Chicago Cubs, Weber, 57, is part owner of the Arizona Diamondbacks and splits his time between Scottsdale, Arizona, and Chicago. He put a deposit down on two condominiums at the Spire totaling $4 million. He made his decision after touring both the Spire sales office and the models at Trump International Hotel and Tower. He was most struck by the contrast in styles.
“[Kelleher] seemed to be a sincere, down-to-earth guy as opposed to Trump, who was like an in-your-face New Yorker. You know, ‘I’m a New York guy. Look what I did for Chicago,’” Weber says.
Weber recalls a party in November 2008 when condo buyers were invited to the construction site and mingled around the 110-foot-wide hole where the Spire’s foundation was being completed. “We were serenaded by strings. There was Champagne. Then we were invited to climb down into the hole and write our names on the wall. It was certainly unique being in the bowels of the building,” Weber says.
But around the same time, Shelbourne Development started to show signs of financial strain. Calatrava had filed a lien against the property that October seeking more than $11 million in payments for his design work. A separate lien of almost $5 million was filed by Perkins + Will, the Chicago-based architectural design firm.
The recession was bearing down hard, and the Spire was becoming one of its casualties. “At the end of the day, the Spire was a very, very optimistic project. A lot of things had to go right for it to get done,” says Earl Webb, president of U.S. operations for Avison Young Inc., a Chicago commercial real estate management and brokerage firm.
When the Spire project was proposed, there was still momentum in the real-estate market, Webb says. Housing prices were continuing to climb, and there seemed to be an insatiable appetite for high-end, luxury condominiums, hotels and retail. But when the financial markets collapsed in 2008, Webb says several factors converged to endanger the project: Consumer confidence weakened and home sales plunged. Corporations retrenched and pulled out of offices, which drove up vacancies and spooked the entire real-estate market. Corporate layoffs further dampened the demand for luxury real estate. And the subprime mortgage meltdown reduced the availability of all types of financing by 75–90 percent.
Suddenly, everything that needed to go right for the Spire was going south instead. “All of these things were happening simultaneously in sort of a perfect storm,” Webb says, “and that’s what hurt the Spire.”
Other real-estate industry experts believe Kelleher failed to do enough research on his potential customers. He counted on attracting buyers from around the world when he should have focused on how many customers he could get in Chicago, says Steven Hovany, president of Strategy Planning Associates Inc., an urban-planning firm headquartered in Schaumburg.
“The global market has to be the frosting. You’ve got to get local interest, local people willing to pay the price. You can’t count on 20 Saudi princes interested in buying a condo in Chicago,” Hovany says.
A DEEP MESS THE SPIRE’S FINANCIAL WOES
$27,600: Rent owed for Shelbourne corporate office
$300,000: Rent owed for condo sales office
$312,000: Delinquent property taxes
$512,000: Owed to construction company for concrete ramps
$5 million: Lien filed by Perkins + Will
$5 million: Loans owed to Bank of America
$11 million: Lien filed by Calatrava
$77 million: Claimed in Anglo Irish Bank foreclosure lawsuit
Perhaps it was simply that fate got in the way of Kelleher joining the tall buildings club. Certainly, the economy was working against him. But his previous development experience was limited largely to building rehabs, and he had never constructed a building taller than 15 stories. Finally, friends and business associates say Kelleher didn’t have the same upbringing and educational advantages of a Donald Trump, and therefore, that extra ingredient of brashness needed to get big projects done was missing.
Born in Ireland in 1961, Kelleher, 49, first came to the United States in 1978 to attend California University of Pennsylvania on a tennis scholarship. His studies in the Keystone State didn’t last long, for he was back in Ireland in 1980, studying and playing tennis at Trinity College in Dublin.
Kelleher never graduated, instead returning in 1988 to the U.S., where he started a commercial painting company in Chicago that eventually grew to 120 employees. He later started buying and rehabilitating buildings in the city.
Using the money from his successful painting and rehab businesses here, Kelleher returned to Ireland in 1996 and participated in the country’s booming economy. His Shelbourne Development company rehabbed and built new properties in Ireland, Britain, France and Belgium. Buoyed by the success of these projects, Kelleher returned to his second city in 2006 to embark on the most ambitious development of his career: the Chicago Spire.
“In my game, this is a once-in-a-lifetime opportunity,” Kelleher told Crain’s Chicago Business in March 2007. A few weeks later, after gaining approval for the Spire from the Chicago City Council, Kelleher seemed moved. “The opportunity to add an architectural masterpiece to Chicago’s skyline is humbling,” he said in a press release.
Clearly, Kelleher had the confidence to look Mayor Richard M. Daley in the eye and convince him the Spire could be built, and had the courage to go toe-to-toe with the likes of Trump while ignoring his trash talk.
“Garrett is a dynamic, very smart, very savvy guy. He’s been very successful and willing to take risks when others wouldn’t,” says Michael Golden, cofounder of @properties, the Chicago-based real-estate firm hired by Shelbourne to sell condos at the Spire.
Yet while Trump has pinstripe suits, power ties and carefully combed hair, Kelleher is often seen in an open-collared shirt, khakis and a sport coat, and he doesn’t try to hide his receding hairline. Also unlike the Donald, Kelleher is known to be soft-spoken and avoids the limelight.
“Garrett is almost the antithesis of Donald Trump. He’s very understated, very unflamboyant,” says Dominic Grace, president of Savills Residential Development in London, which spearheaded the Spire’s global sales and marketing campaign.
Some people in the Streeterville neighborhood defend Kelleher and say they found him amenable to their concerns about the development. When the design was first unveiled, some neighbors were worried about a massive skyscraper overpowering the neighborhood skyline. But Kelleher sat down with them and eased their fears by showing how the glass structure would be transparent or reflect light, and how it would only minimally obstruct their views, says Gail Spreen, owner of a local real-estate firm and an officer with the Streeterville Organization of Active Residents, a local community group.
“Garrett was responsive and engaging. He was willing to listen to us,” Spreen says.
She also was struck by Kelleher’s serenity. Spreen recalls attending a presentation where Kelleher was standing beside an expensive glass model of the Spire. He accidentally knocked it to the floor and it cracked.
“I was thinking, I’m so glad it wasn’t me who knocked it over,” Spreen says. “He didn’t blow up at all. He calmly picked it up and moved on.”
When Shelbourne prepared to drive 34 heavy concrete steel caissons into the hole to provide support for the Spire’s foundation, nearby residents of the East Water Place Townhomes were alarmed that the heavy pounding would damage their units. Shelbourne representatives met frequently with the townhome owners association and agreed to install microphones, seismographs and other equipment to monitor the vibrations and ensure there would be no damage, says David McLauchlan, a past president of the association.
But even the best diplomat is bound to make a few enemies if he leaves a mammoth hole in someone’s front yard. When Daniel Sochor bought a ground-floor townhome in 2008 in the East Water Place complex, his view included portions of the Chicago River and Lake Michigan. Soon he looked out at construction workers digging the hole for the Spire. Now with work halted, a tall wooden fence has been erected just six feet from his doorway, completely obstructing his perspective and that of a half-dozen neighbors.
“The view before wasn’t that spectacular. But now the fence is right up against our property lines, and it looks like it’s going to be that way for years to come,” says Sochor, 25, a structural engineer.
The work shutdown also jeopardizes the future of a proposed 3.5-acre public park east of the Spire development. In return for allowing the park property to be used as a construction staging area, Shelbourne made an agreement with the city to contribute $9 million toward building DuSable Park.
Shelbourne also planned to design the park, which would include running paths and a small boat dock where kayaks and canoes could land, simulating the arrival in the 1780s of Chicago’s first outside settler, Jean Baptiste Point DuSable, at the nearby mouth of the Chicago River and Lake Michigan.
But the payments haven’t been made, and access to the park site is blocked by the padlocked Spire construction site, says Erma Tranter, president of Friends of the Parks, an advocacy group campaigning for DuSable Park.
“It’s frustrating. We’ve been trying to get DuSable Park completed for 20 years. Unfortunately, it doesn’t look like it’s going to be developed any time soon,” Tranter says.
The mounting legal actions against Shelbourne make the prospects even more doubtful. Shelbourne was evicted last spring from its swank sales office in NBC Tower after the landlord sued, claiming he was owed more than $300,000. More recently, in November, the company abandoned its local corporate offices at 111 South Wacker Drive after the landlord filed an eviction complaint in court claiming it was owed $27,600 in unpaid rent.
Anglo Irish Bank Corporation, Kelleher’s lead lender, recently filed a foreclosure lawsuit claiming it was owed $77 million. In December, a Cook County Circuit Court judge appointed a receiver to manage the Spire property while the case is in court.
Meanwhile, two Chicago investment firms—FNA Elm LLC and Wellington Investments LLC—have teamed up to purchase the $312,000 in delinquent property taxes on the Spire property. If Shelbourne doesn’t step forward within two years to repay the back taxes, the investment groups could go to court to seek title to the property.
At the same time, a number of business associates also claim Shelbourne owes them money. Bank of America Corporation filed suit seeking repayment on nearly $5 million in loans it claims were personally guaranteed by Kelleher. Lorig Construction Company said in a suit that it is owed $512,000 for building concrete ramps on the site. The parties in all these legal proceedings declined to comment.
As a sign that Kelleher is waving the white flag, condominium buyers report they’ve been given back their deposits.
Despite all these dire signals, the Spire’s local broker, Golden of @properties, insists the project isn’t dead. “Death might be an overblown term. I don’t think it’s dead. [Shelbourne is] still actively trying to put something together,” Golden says.
Others are skeptical. “You can’t exactly dance on the grave. But as more time goes by, it’s less likely it will go ahead,” says Antony Wood, executive director of the Chicago-based Council on Tall Buildings and Urban Habitat, an association of architects, engineers and planners.
Given the continued anemia of the real-estate market and lending activity, Wood says it may be years before the next great development cycle begins. “I think the Chicago Spire would have been a beautiful addition to the city. It would have attracted international attention to Chicago,” Wood says. “Unfortunately, it wasn’t far enough along when the recession hit. That’s why it only got to be a big hole in the ground.”
As for the hole, the Chicago Architecture Club thought it would have some fun and sponsor a contest called “Mining the Gap,” inviting architects and planners to submit ideas for how the hole could be used. More than 150 entries arrived from around the world, with the $3,500 grand prize awarded to a team led by Lehnerer at UIC last May. The design, titled “The Second Sun,” envisions the land surrounding the hole transformed into a beach, with the hole becoming a swimming pool attached to a large yellow balloon. The balloon would float up and down, lifting the pool with it, representing a rising skyscraper and mirroring the hot air balloon ride at nearby Navy Pier.
“So, you see, the hole actually becomes more interesting than the high-rise itself,” Lehnerer says. “There is much more creativity in figuring out what to do with the hole. I love the hole. I wish it were a hole forever.”
Given the money pit Garrett Kelleher finds himself in, Lehnerer may just get his wish.