With Sterling Bay missing deadlines on infrastructure work for its $6 billion Lincoln Yards megadevelopment amid its search for new investment, the firm may have to turn to Chicago Mayor Brandon Johnson to rethink the financing behind the massive project.
Chicago-based Sterling Bay is courting more support from Johnson to get the city to step in and front the funds to install roadways on its 53-acre development district along the Chicago River, right as it released more details about how, it claims, former mayor Lori Lightfoot’s administration blew up a deal that would have kickstarted the infrastructure work, Crain’s reported.
Sterling Bay is seeking more mayoral support for the project — set to include 6,000 housing units along with other commercial buildings — after the developer four years ago agreed to pay for such infrastructure work up front and get reimbursed over time through a tax increment financing arrangement.
It hasn’t been able to come up with the money to get started, though.
A sluggish approval process and lack of financial backing from Lightfoot has hindered the ambitious plan. Now, Sterling Bay CEO Andy Gloor is working to convince Johnson of Lincoln Yards’ potential economic impact, including the creation of jobs and 1,200 affordable housing units.
Sterling Bay claimed in a statement that it “took on the responsibility of the municipality by both financing and building” the infrastructure because the city was “unwilling” to do so itself under Lightfoot and her predecessor Rahm Emanuel. “Developers almost never fund construction of infrastructure out of pocket,” the firm’s statement said.
Lincoln Yards financial reboot was made necessary by a kerfuffle last summer, when Sterling Bay pitched Lightfoot a bond deal with the Wisconsin-based Public Finance Authority. The deal would have provided Sterling Bay some hundreds of millions of dollars to begin infrastructure work through a package that the developer said “was devised by the developer to place the financial risk on the developer with no exposure or risk to the city.”
It required city approval, though, because it involved the issuance of city notes backed by tax increment district proceeds and the Public Finance Authority required it.
While Lightfoot ultimately signed off on the deal, Sterling Bay alleges her administration took too long, and rising interest rates diminished the viability of the proposed financing before the final authorization. Sterling Bay backed out of the transaction, blaming Lightfoot’s process.
“Sterling Bay needed the city to work faster,” the firm’s statement said.
Former Lightfoot administration officials said Sterling Bay didn’t get the city involved until all the haggling between the firm and the authority had taken place, and the city was forced to review hundreds of pages governing the deal to make sure taxpayers were safe and the city’s creditworthiness wouldn’t be harmed.
“Mr. Gloor’s recent comments omit that when the company made a more reasonable request in 2022, the Lightfoot administration helped facilitate an additional financial lifeline to the project, while protecting tax dollars,” Lightfoot said in a statement to the publication.
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Sterling Bay previously proposed a special taxing district to help finance the development, but Lightfoot rejected the idea, saying such districts are typically formed along neighborhood business corridors to provide extra funding for public services like snow removal and waste management. She feared a special taxing district for Lincoln Yards would lead to a sharp increase of proposals for similar financial arrangements for developers.
Sterling Bay said an SSA remains “a viable financing mechanism to ultimately kickstart construction on critical public infrastructure,” yet also said the “most viable” tool would be a bond deal similar to the one it had with the Public Finance Authority.
As the firm hunts for financing to get the infrastructure kicked off, it’s also in the midst of seeking around $300 million from the Chicago Teachers Pension Fund to recapitalize the Lincoln Yards development fund that will help pay for the eventual construction on the site.
“We look forward to continuing to work with our partners and the current administration to advance Lincoln Yards,” Gloor told the outlet. “We have great momentum going and bringing this critically important project to Chicago in a timely manner is our priority.”
— Quinn Donoghue