Lake Zurich issues ultimatum to developer
Lake Zurich village officials say they haven't seen any evidence of the financing the developer of the village's downtown project said he has arranged, and have issued an ultimatum.
Village officials are now giving Equity Service Group until Jan. 1, 2011 to show proof of the $12.5 million in financing to draft detailed plans or they will terminate the contract.
The ultimatum comes two weeks after David Smith of Equity Service Group told the village board financing for the project had been secured amid the hardships caused by the weak economy.
He also said he could not meet the Sept. 30 deadline for submitting detailed plans for the first project, and requested a 10-month extension.
On Monday, Village Administrator Bob Vitas told the village board Smith has failed to produce evidence that he has financing in place, and the contract should be terminated.
“There is no other option other than to take that action, Vitas said. “That is not an easy recommendation to make to this board as you all know.
Trustees made an initial motion to terminate the contract. After further board discussion, showing interest to continue the development, Vitas suggested the final ultimatum.
“If we grant him extension, should funding be secure, it is a nonissue, he told the board. “In the event his funding fails to be produced, it is immediate termination.
Board members expressed concern over the delays and minimal communication to notify them of progress. Trustee Rich Sustich said the board needs to take into consideration the risks their shareholders, the residents, are taking in this project.
“This is the seventh time you have come before the board and said funding is imminent, he said.
The board's action is the latest in the downtown redevelopment plan that calls for razing and rebuilding nearly all existing structures along both sides of Main Street from Old Rand Road west to Lake Street. They were to be replaced with two- to five-story buildings with ground-level retail and condominium/offices above.
The village's contract with ESG, signed in February 2009, gives the Barrington-based developer four opportunity periods during which it has the exclusive right to buy village property in specified downtown blocks.
The project has faced problems, mainly due to a housing market slump and problems obtaining financing.
Several trustees, including Dana Rzeznik, also voiced concern even if Smith acquires funding, what will happen if the project falls through the cracks such as if construction starts and no one buys.
“I am not sure if the economy does not improve and nobody buys the new townhouses, what happens and who owns them, she said.
Smith responded that he is building at his company's risk.
“We carry the burden of building it and selling it and managing it. You're guaranteed the tax revenue, he said. “The investment has shifted fully into our camp and we accept that challenge.