Never stop fighting.
That’s the mindset of some developers aiming to expand the housing stock of Chicago’s outermost suburbs after the Great Recession led many to abandon new single-family subdivisions only half-built or even before finishing a single home.
Since the fallout, most stalled projects resumed after sitting dormant for years, oftentimes by new builders who snagged vacant land on the cheap from the original developers who ditched the plans, through foreclosure auctions or otherwise.
But some disputes arising from the housing crisis that began nearly 15 years ago are still being hashed out in court or the halls of local governments.
One flared up in a new lawsuit filed last month involving a 300-acre development site called Westbury Village that was approved nearly 20 years ago for 830 homes. The project includes an elementary school, a 15-acre park and 30 acres of retail in Yorkville, one of the westernmost suburbs in the collar surrounding Chicago. None of the project elements have begun construction.
“We had a couple dozen entitled subdivisions that were all basically left on the table during the Great Recession in 2008,” Yorkville city administrator Bart Olson said in an interview. “Almost all of them were picked back up in some form or another in the early or mid-2010s. Now, there’s less than five that never really restarted. Those run the gamut from a farm field that never built infrastructure to a half-built subdivision. We are so diverse in our development, people are in all stages of successes or having issues.”
The recent suit was filed in New York court by a firm affiliated with John C. Carroll of the Washington, D.C.-based developer Ocean Atlantic. In 2008, the firm lost the property to a lender through foreclosure before breaking ground, after it spent $11 million on the project. It names an LLC called Chicago WB Investors tied to William S. Zabala as a defendant, and alleges it broke an agreement with Carroll’s company to put $650,000 toward developing the 96-acre first phase of the project that it bought at auction in 2013.
The suit also claims Chicago WB Investors agreed to buy all three phases and allowed the other two to be sold to other bidders, and has since entered contracts to sell Westbury property at less than market value. It also states that Carroll’s company should be getting more proceeds from property sales than the contracts would provide. Attorneys for both the Chicago WB Investors business and Carroll’s company declined to comment.
The suit also claims Chicago WB Investors has been “stalling in promoting the development, refusing to complete tasks associated with the development, delaying work on the development and failing to build improvements that would lead the development to more success.”
At this point, though, such clashes represent the tail-end of the cleanup of the Illinois real estate mess made by the Great Recession. They were common between developers, their partners and local governments during the last decade as they tried rekindling the suburban Chicago housing market’s flame extinguished 15 years ago as it became clear it was overheated.
Instead of trying to find a path forward through legal maneuvering in court or finishing the remnants of a neighborhood first planned long ago, builders and developers have increasingly opted to start from scratch this year, working to entitle new plots of land for single-family subdivisions.
Most of those that became dormant in suburbs nearer to Chicago than Yorkville and other towns on the outer rings of the metropolitan area have been built out over the last five years. It’s on the outer edge of the metropolitan area where there’s still legal battles and tough negotiations going, aimed at kickstarting residential construction back up.
“There’s not a lot of broken subdivisions still left,” said Larry Dickstein, a land broker who recently arranged a $2 million sale of 60 acres in the northwest suburb of Algonquin to Lennar, which plans to build about 135 new homes there in a freshly planned subdivision. “We’ve seen more activity in the last couple years for land that hasn’t yet been developed.”
Where there are still disputes over subdivisions shut down by the Great Recession playing out, they’ve been long-running and bitterly fought. Robert Shelton, the village president of the tiny town of Hebron on the northern edge of McHenry County, is trying to bring one to an end by mediating a new deal between Lennar and J&L Contractors.
J&L is the entity that dealt Shelton’s local government a blow when an appeals court sided with the company over the village in a yearslong lawsuit, and put taxpayers on the hook for completing roads in the Trails subdivision that were only half-built in the neighborhood by a previous developer that lost the property through a court-approved sale at which J&L paid just $214,000 to take over 138 empty lots out of the 174 that were planned. Just a handful of homes were built by the previous developer and it remains mostly empty today.
Shelton says he’s coming close to striking a deal with J&L and Lennar that will allow the roads and infrastructure to be finished and homes to be built slowly in phases of several dozen at a time.
“It is turning out to be fruitful at this stage,” Shelton said, noting the agreements that could finally revive construction haven’t been finalized. “It has taken almost a year and a half.”
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