Developer may sue Lake Zurich over hire for downtown

Lake Zurich may be facing a lawsuit for signing a deal with a Barrington-based developer to revise the village's downtown master plan and propose new projects.

The village's former downtown master developer, McCaffery Interests Inc. of Chicago, is miffed the village is seeking other developers for property it claims to have sole rights to build on.

The village's original agreement with McCaffery gave the developer exclusive rights to undertake seven phases of downtown redevelopment on properties along Main Street from Old Rand Road west to Lake Street.

"We're not releasing them from that contract," said Dan McCaffery, president of McCaffery Interests. "I have the first right to develop all of it. We have a fully enforceable redevelopment agreement with the village, which they arbitrarily think we don't have anymore."

McCaffery paid the village $2 million for land to build 39 townhouses along East Lakeview Place -- a project that's only half complete -- and the rights to develop the rest of downtown.

McCaffery's project involving a five-story condominium building proposed for a stretch of Main Street across from the lakefront promenade was nixed in the planning stage because project costs rose beyond the village's expectations.

McCaffery said the village must compensate him for the rights to downtown and for the $1.8 million he spent on the condominium project planning.

Lake Zurich Mayor John Tolomei said this week the village fired McCaffery because he "mismanaged" that project.

"If we need to, we'll go to court with him," Tolomei said. "We'll fight it out. We believe (McCaffery) always had the obligation to provide all of the financing, above the village contributions that we had agreed to make."

McCaffery said it's the village that's in breach of contract, which it pulled out of because it couldn't afford to subsidize $9 million for infrastructure improvements related to the roughly $32 million condominium project.

"We did everything that the village asked us to do," McCaffery said. "That design is the design they wanted. It's sad that the village is out of money."

The village severed ties with McCaffery in December saying the two had reached an impasse on project costs. At the time, officials said McCaffery gave permission to approach other developers without fear of litigation.

The new deal approved this week by Lake Zurich gives developer David Smith's Equity Services Group exclusive rights to negotiate with the village on any downtown site Smith chooses to redevelop for 18 months, if the village adopts Smith's revised downtown master plan.

Smith would have an exclusive right to propose projects for the village-owned site across from the lakefront promenade -- McCaffery's condominium project site -- and other key downtown parcels.

The agreement requires Smith to submit specific development plans within the first six months for village review and approval, or risk losing that exclusive right.

"I don't think what we're doing with Smith conflicts with any rights that Dan might have," Tolomei said. "We're only going to be entertaining his proposals, not going forward with them at this time."

Tolomei said he hopes Smith could bring McCaffery back to the negotiating table and work out a settlement.

McCaffery said if Lake Zurich continues down this path, he will be forced to sue.

"It's absolutely imminent, if the village tries to sell or otherwise negotiate on land that I already have a right on," he said. "Maybe they will get further and further into it and leave me no choice but to file a lawsuit."