CHICAGO (CBS) - A judge has issued a foreclosure order that hands the Block 37 mall downtown over to a bank, according to a published report.
Crain's Chicago Real Estate Daily reported that Cook County Circuit Court Judge Margaret Brennan issued a foreclosure order against the mall, and found developer Joseph Freed & Associates LLC liable for $177.85 million that is owed to Bank of America and several other banks.
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The foreclosure lawsuit was filed last year in the Chancery Division of the county Circuit Court. It said the developer had been in default since March 2008 or earlier, and that the project had exceeded planned costs by $34 million.
Freed had fought against the lenders, arguing that the banks had reneged on a promise to restructure the loan and refused to approve a reworked lease with a movie theater that never ended up moving in, Crain's reported. Freed also tried to argue that the recession had made it impossible for the developer to move ahead, Crain's reported.
But Judge Brennan disagreed. Now, a foreclosure sale could be set in the next couple of months, according to Crain's.
When the foreclosure lawsuit was filed in 2009, the mall had yet to open, and Freed expressed concern that maybe it never would. But the mall did eventually open, and is now anchored by an assortment of fashionable retailers including Puma, Steve Madden, Anthropologie, Sephora and a Disney Store.
But critics have bemoaned the amount of empty space in the mall, as well as a planned Chicago Transit Authority "superstation" with express train service to O'Hare and Midway international airport that has never been built.
The 22 W. Washington St. building, which houses CBS 2 and Morningstar, is also on Block 37, but is not part of the Freed development.
Bounded by Washington Street, State Street, Randolph Street and Dearborn Street, Block 37 once sported a hodgepodge of vintage buildings housing theaters, arcades and wig shops, among other businesses. Among its most prominent buildings were the landmark 1872 McCarthy Building, the Hillman's Building with the Stop & Shop gourmet grocery store, and the United Artists Theatre.
In 1988, under Acting Mayor Eugene Sawyer, the City Council gave developer FJV Venture a $24 million subsidy to redevelop the site, the Chicago Tribune recalled. To facilitate demolition, the city landmark status for the McCarthy Building was revoked.
In October 1989, shortly after Mayor Richard M. Daley was elected, all the buildings except a ComEd substation were demolished.
The original plan called for a five-story shopping center, and two towers designed by celebrity architect Helmut Jahn and standing 30 and 50 stories tall, the blog ArchitectureChicago Plus recalls. But that project collapsed, and for more than a decade years afterward, Block 37 remained nearly empty and was used mostly for the Gallery 37 youth artists' programs and the "Skate on State" ice rink.
The city ended up buying Block 37 back from FJV Venture, in 2001, and sold it to another developer, Mills Corp., two years later. But in October 2006, Mills fell into financial trouble and handed over part of the project to Golub & Co., which now manages the 22 W. Washington St. building, and the mall portion to Freed.
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