Downtown Developer Fails to Attain Funding For Project
‘Drop dead date’ of January 1 came and went with no proof of $12.5 million in funding for revitalization project.
Equity Services Group, LLC (ESG) has failed to attain $12.5 million in funding for the downtown redevelopment project needed by the Jan. 1, deadline the Village Board extended to the company last year, according to village officials. Now, the board will need to decide to further extend that deadline or start over with a new developer.
"As of January 1, 2011, no funds for the development of downtown Lake Zurich have been verified, and because of how the resolution was drawn up, the contract with Equity Services Group, LLC (ESG) has been terminated," said Jim Johnson, village trustee, who verified the information with ESG owner David Smith.
When contacted by phone about the funding status for the project, Smith replied, "It's a Sunday and I am not answering you."
It has been a long and many times bumpy road since the inception of the downtown revitalization project back on May 21, 2008.
The development agreement was entered into between former Mayor John Tolomei and ESG. The contract encompassed the creation of a 'master plan' to revitalize the downtown area.
The project was off to a flying start at its beginning; public forums were held June 9 through 13, 2008 where drawings termed 'design charettes' gave a glimpse of what the future of Lake Zurich might be transformed into.
The charettes were on display for interested residents who were referred to as 'stakeholders' and invited to give their feedback and opinions on what they viewed.
Since then, the project has had a number of stops and starts; the most significant of those being ESG's inability to meet funding deadlines necessary to bring those charettes into a reachable reality.
"Smith has done nothing for 18 months; he never approached the village board to tell us what was going on, any update we received was because we and the administration chased after him," said Dana Rzeznik, trustee.
"The only time I saw him in a year-and-a-half was at the October 4, 2010 meeting and then at the last board meeting on December 20, 2010 when he stated funding was imminent," Rzeznik added.
At the October 4 meeting, Smith sought and obtained an extension from the board to acquire financial backing no later than January 1, 2011.
At that point, he had missed the deadline for not only project funding, but the entirety of the 3B submission that was due by September 30, 2010.
Despite the setbacks, Johnson maintains hope that the project could see the light of day due to correspondence he has seen between Q Lotus, the financial backer of the project and Southshore Real Estate, the 'permitted third party' that would be the recipient of funding to get the project going.
Smith is a 51 percent stakeholder in Southshore Real Estate.
"I have seen a document from Q Lotus to Southshore, stating that if they could not close prior to December 30, 2010, that they would in fact close within the next 60 days," said Johnson.
"I have every reason to believe that that commitment is not only possible but could occur within the next 30 days," Johnson added.
"I am hoping that all of the delays are only the result of the economy and nothing clandestine; because I don't see anyone else rolling up with wheel barrels of money for the development of downtown Lake Zurich," said Johnson.
Other trustees believe it is now time to move forward.
"I think everyone in the village is saddened by the inability to get this project moving; for the village, it places a new burden on us to really start again after more than 18 months of expectation," said Rich Sustich, trustee.
"Up until September 30, 2010 we had to honor the contract (with ESG). Because there is a 60 day notice in the contract, Smith had the opportunity to rectify the issues, which would have moved the deadline to December 1,2010," Sustich said.
"We essentially gave him more time than he was allowed per the contract, and at this point it is time to move on," Sustich added.
Sustich said the contract with ESG was personally negotiated by former Mayor Tolomei, and it was brought before the previous board without going out for bid to other developers.
He added that only at the last minute the board was insistent it needed to go out for bid. "Smith had all the time in the world, then everyone else didn't have the time needed to prepare a thorough project plan," said Sustich.
Mayor Suzanne Branding was a member of the board at the time that Tolomei presented Smith and ESG as the potential new developer for the downtown area.
"Perhaps this failure of performance would have been avoided had the prior board and village president required adequate due diligence before signing the contract with ESG," said Branding.
"That is something I repeatedly requested, and in fact the former board even voted down more due diligence," Branding added.
Another trustee has the mind to keep the door open to see what could materialize with either ESG or another developer.
"While (Jim) Johnson has talked to Smith, we haven't received official notification from the village; assuming that the funding was not obtained, I am sorry to see this deal fall through," said Jeff Halen, trustee.
"But, it does open up a new opportunity for other developers including ESG who could come back to help revitalize our downtown," said Halen.
Bob Vitas, village administrator stated at the annual TIF Joint Review Task Force meeting on December 1, 2010 that if ESG didn't have funds by the 'drop dead date' of January 1, 2011, a 'Plan B' contingency is already in place to move forward at the start of the new year.
"We've been in a recession or depression for a good while now, and this is a major, major project," said Johnson.
"To my knowledge, there is no one that can spend the kind of money this project would take, which could be up to $200 million all said and done," Johnson said.
"When we have something tangible (funding); something more than a promise, because we've had a number of those, that is the time for this board to get together to handle the what ifs," said Johnson.
The board of trustees meets this evening at 7 p.m. at Village Hall and an update on ESG, LLC development is on the agenda.