Someday, something will be done at the mostly fallow property at Lincoln Yards, the North Side repository for the best-waylaid plans in Chicago development.
Land in the city is too coveted for Lincoln Yards to stay as it is. But the larger the site, the greater its complications. At 53 acres, Lincoln Yards has proven too much for the Sterling Bay development firm that stalked it for more than a decade.
Sterling Bay, a savvy operation with backing from the billionaire Crown family, is losing the site to impatient lenders. And that has created an opening for Chicago’s JDL Development. Jim Letchinger, JDL’s chief executive officer, is close to deals for the property, sources have told the Chicago Sun-Times.
A change in control could reopen the debate about the best uses for the old industrial tract that once was home to Finkl Steel, now relocated elsewhere in the city, and other businesses.
It’s likely that any new approach won’t look anything like Sterling Bay’s reach-for-the-skies plan that was studded with riverfront high-rises. The developer’s final plan imagined about 14 million square feet, half of that for office or retail space, half for residences.
“I don’t see any office space there at all,” said Chicago developer John Murphy, who isn’t involved in Lincoln Yards. “There’s just too much vacancy downtown.”
Inflation and higher borrowing costs have driven up the price of new construction, Murphy said, making a move to already-existing office buildings cheaper for companies seeking space.
But Murphy still sees the appeal of Lincoln Yards despite the obstacles. It sits between old-money Lincoln Park and new-money Bucktown and can be seen as a sponge absorbing both.
“It has all the attributes of a solid location for multifamily housing,” he said.
Lincoln Yards’ boosters “were really talking about it as the Loop 2.0, but it doesn’t have anything near to the connectivity that the Loop does,” said Jonathan Snyder, executive director of the industrial retention group North Branch Works, which supported the Sterling Bay plan but otherwise argues for city policies that promote manufacturing.
“I was never a fan of the towers,” Snyder said of the Sterling Bay plan.
He pointed out that there are no good CTA connections to Lincoln Yards, making the property difficult to access.
Sterling Bay touted Metra’s Clybourn stop as a five-minute walk from the property. Its master plan included an extension of the 606, the pedestrian and bike trail that connects North Side neighborhoods. It even had a fanciful sketch of a skate park running beneath the nearby Kennedy Expressway. Neither the 606 extension nor the skate park is in the works any longer.
Lincoln Yards “needs a new vision,” Snyder said, suggesting that an anchor development could get people to want to visit the property.
He said he would like to see light manufacturing, maybe a pharmaceutical company, on the property to diversify the jobs base.
Letchinger declined to discuss Lincoln Yards.
But a source close to his company said Letchinger’s plans “have no resemblance” to Sterling Bay’s and that talks are underway with Mayor Brandon Johnson’s administration.
“The city is incredibly motivated to move this forward,” the source said.
Letchinger has backing from Kayne Anderson Real Estate, the source said. Kayne Anderson representatives could not be reached for comment.
In May, Ciere Boatright, Johnson’s planning commissioner, told the Sun-Times that Lincoln Yards needed a “hard reset” because its plan envisioned creating the equivalent of two Willis Towers’ worth of office space — out of the question since the COVID-19 pandemic.
Ald. Scott Waguespack (32nd), who inherited Lincoln Yards when it was redrawn into his ward in the most recent Chicago City Council remap, said political miscalculations and poor design hampered the project. He called it “poor urban planning from Day 1.”
“When I took it over, we were saying, ‘Go ahead and move forward. You have all of your entitlements,’ ” Waguespack said. “They were afraid. Like: ‘You’re going to come in and stop it because you voted against it.’ I never said that.”
Waguespack said he sees Lincoln Yards as a classic case of “too big to fail … too aggressive to succeed.”
He said Sterling Bay painted itself into a corner by “buying up every piece of property available, tearing down buildings as quickly as possible and pulling dozens of parcels together” for what it touted would be the biggest and most lucrative development Chicago had seen in years.
“If you don’t have all your ducks lined up and all your finances at that time, it made it very difficult for Sterling Bay to really get going,” Waguespack said.
Waguespack said he likes the idea of anchoring the project with a stadium for the Chicago Stars women’s soccer club. But when Sterling Bay pushed an arena for the Chicago Fire, neighborhood groups objected. The Fire now appears ticketed to building a new stadium in the South Loop on the tract being promoted as The 78.
Apart from what goes where, Brian Comer, president of the Sheffield Neighborhood Association, said people who live near Lincoln Yards will want to see how new construction fits its surroundings. Comer said developers and city officials seldom get into the nitty-gritty of infrastructure.
“It’s all very piecemeal in those discussions,” he said.
The pandemic’s chilling effect on Lincoln Yards
COVID’s arrival in 2020 scrambled every calculation behind real estate projects, changing how Americans live and work. The office market still hasn’t recovered, as companies have seen that employees who work remotely part of the time require less office space.
Sterling Bay couldn’t have anticipated a pandemic. But contagion is just one of the surprise storms that can buffet plans for long-term development.
“Megadeals are always tricky,” said Collete English Dixon, executive director of the real estate program at Roosevelt University. “The great scale/complexity of projects like [Lincoln Yards] makes them more vulnerable to time and market changes.”
English Dixon, who worked in real estate finance for 30 years, said Chicago city officials will need to cooperate with a new Lincoln Yards developer to craft a sensible plan and fund the public works it needs.
In 2019, then-Mayor Rahm Emanuel was all in on the lavish promise of Lincoln Yards. The City Council approved a redevelopment deal with Sterling Bay that called for public subsidies of up to $1.3 billion, including debt-financing costs.
The money would be drawn from tax-increment financing — the city funding mechanism in which revenue for project costs such as new streets or bridges comes from the incremental increases in property taxes as the development grows. Critics seized on the TIF money as a corporate giveaway.
But there was a huge catch. Under its deal with City Hall, Sterling Bay had to pay for new streets, utilities and other improvements itself and then would be reimbursed by the city as the work was completed. The most recent report for the TIF district covering Lincoln Yards, in 2023, said its account had a balance of $79.9 million at the end of that year.
Sterling Bay has finished only one building on the site, at 1229 W. Concord Place, an office venture for life sciences research. The building has zero tenants.
Life sciences haven’t expanded as fast as the offices marketed for it, and now the sector is chilled by a cutoff of federal research grants under the Trump administration.
A Sterling Bay spokeswoman said about $20 million in river-wall work and improvements related to its lone building has been completed — money that will be due from the TIF district. The redevelopment agreement allowed the city to finance part of its TIF reimbursements, in effect speeding payment to Sterling Bay. A city planning department spokesman said no repayments have been made yet.
Sterling Bay chief executive officer Andy Gloor and managing principal Keating Crown wouldn’t agree to interviews about Lincoln Yards.
In a written statement, Gloor said: “Sterling Bay has always believed in and bet big on our hometown of Chicago, which is why the vision for Lincoln Yards was on par with the best developments in the country. Unfortunately, the public infrastructure obligations were so significant that when coupled with multiple adverse economic events, their burden was too great for the project to bear.
“The original entitlements for the project contemplated a municipal financing vehicle that could have front funded a portion of the $500 million infrastructure costs. Delays in obtaining alternatives for that financing structure, concurrent with the pandemic, drop in demand for commercial space and rising interest rates meant that capitalizing the infrastructure went back to the drawing board at an extremely volatile time for capital markets.”
Lightfoot said yes to Lincoln Yards subsidy
In 2019, then-Mayor-elect Lori Lightfoot greenlighted the subsidy in the waning days of the Emanuel administration, only to have a political falling out with Sterling Bay.
“They came to Lori at some point in time and said, ‘We need to tweak the TIF to enable us to get financing,’ and she didn’t do it because she thought they were … actively trying to recruit a candidate for mayor against her,” said a source familiar with the negotiations.
“Lori fought with Sterling Bay, which got in the way of extending the financing during a period of time when interest rates were low and would enable development. And then interest rates went up by 4%, which was huge,” the source said. “It destroyed every single real estate deal. And when they had to refinance their debt at higher interest rates, they couldn’t afford it. So they had to give the property back to the bank. The market moved. And it was over.”
Waguespack said Sterling Bay “wanted hundreds of millions” of dollars from Lightfoot as a front-loaded payment.
“That just wasn’t going to happen,” said Waguespack, who under Lightfoot chaired the powerful Finance Committee. “The city didn’t have $300 million or $400 million to hand out. … Coming out of COVID, there were no funds except the federal dollars. And those were all just sustaining what we had to keep the city afloat.
“We couldn’t just say, ‘Here’s all of this money for a private entity to kick-start this thing.’”
Waguespack said Lightfoot isn’t to blame for Sterling Bay’s financing trouble.
“They signed the agreement … to pay for everything upfront,” he said. “They agreed to a model that they wanted — that they demanded. There was no stopping them. The market and their ability to pull it off said otherwise. It’s pretty hard for anybody to argue that they didn’t put themselves in that position — that somebody else did it to them.”
Other longtime Chicago developers remain enthused about Lincoln Yards, while having sympathy for Sterling Bay.
Murphy, chairman of Murphy Real Estate Services, said that, aside from normal financial risks, developers in Chicago have to navigate rules mandating setasides for affordable housing. He said there’s also uncertainty over how properties will be valued for tax purposes, leading many investors to bypass Chicago. Developers have complained for years about these things even as construction proceeded in hot areas such as Fulton Market.
Scott Goodman, principal of Farpoint Development and a former Sterling Bay executive, said recent years have posed a “really hard real estate market.” But he said JDL will revive Lincoln Yards with a more suitable plan.
“I bet there’ll be a really large residential component and probably not that dense,” Goodman said. “It won’t be high-rises. It’ll be mid-rises and maybe single-family townhomes. It’ll look a lot like Lake View in 10 years, with a lot of residences, a lot of supportive retail, parks. The river makes it super-unique. I think it’ll be fantastic.”
Lincoln Yards: A timeline of promise and trouble
Lincoln Yards encompasses a former industrial area on the North Side along the Chicago River. Back in 2015, developer Sterling Bay began buying properties in the area, and later won city approval for an estimated $6 billion redevelopment. But after almost a decade, little has been built on the 53 acres.
2014 — A. Finkl & Sons, Chicago’s oldest steel mill, completes its move to the Southeast Side and lays plans to demolish its North Side buildings, making its 22 acres more attractive to a buyer.
2015 — Sterling Bay negotiates for the Finkl site and begins buying nearby properties.
2017 — The City Council adopts Mayor Rahm Emanuel’s plan to scrap the all-manufacturing zoning for the North Branch Corridor, which includes the Lincoln Yards site. The plan allows for residential and commercial use on sites deemed no longer in demand for manufacturing.
Sterling Bay pays $104.7 million to the city for 18 acres it used for fleet maintenance. The purchase adds to Sterling Bay’s holdings in the North Branch Corridor.
City officials offer the area to Amazon in its search for a second corporate headquarters. Amazon would later tour the property but ultimately choose a site near Washington, D.C.
2018 — In a partnership with Chicago Cubs owner Tom Ricketts, Sterling Bay hatches a plan to buy a United Soccer League franchise and have it play in a Lincoln Yards stadium. And concert promoter Live Nation says it plans a multi-site entertainment district. Both plans produce intense opposition from neighbors.
2019 — To secure aldermanic support, Sterling Bay and Ricketts drop plans for the soccer stadium and the Live Nation proposal is scrapped.
In the final weeks of his administration, Emanuel pushes through city agencies approval of the development rules governing Lincoln Yards. It includes a commitment of up to $1.3 billion to reimburse Sterling Bay for public improvements, including $400 million in financing. The project calls for up to 14 million square feet of residential or commercial construction, including a cluster of high-rises — some close to 60 stories — and 21 acres of open space.
In April, the City Council approves the project after Lori Lightfoot, then the mayor-elect, agreed to let it go through. Lightfoot had campaigned against Lincoln Yards.
Community groups angered about the public subsidy sue to block the project, but a Cook County Circuit Court judge throws out the case. He rules the plaintiffs could show no harm from the subsidy.
2020 — The pandemic brings parts of the economy to a halt and shakes up assumptions about residential and office demand in Chicago and other cities. Financing for construction projects dries up.
Sterling Bay announces plans to begin a new bridge at Throop Street to improve traffic flow. While a design has been finished, no work has begun.
2021 — Sterling Bay breaks ground on a $200 million eight-story building designed as a life sciences center. It opened in 2023 but has yet to score a tenant.
2022 — With no sign of demand that would trigger construction, pressure grows on Sterling Bay to repay lenders such as Bank OZK, J.P. Morgan Asset Management and Lone Star Funds.
2023 — Desperate to raise cash, Sterling Bay approaches the Chicago Teachers Pension Fund for a reported $300 million investment, even though the teachers’ union was a leading critic of Lincoln Yards’ public subsidy. The pension fund says it declined to invest after a thorough review.
The approach comes as Sterling Bay CEO Andy Gloor tries to forge a relationship with new Mayor Brandon Johnson. Despite the pandemic, Gloor blames Lightfoot for the project’s trouble, telling Bloomberg she “put a brake” on the work. Lightfoot denies it.
2024 — Florida-based Kayne Anderson Real Estate emerges as a potential backer in partnership with Sterling Bay, which puts properties near Lincoln Yards up for sale.
2025 — After writing down the value of loans on the property’s northern section, Bank OZK seizes it from Sterling Bay and confirms in filings it has a deal to sell it for close to $84 million. Sources said the buyer is Chicago’s JDL Development, which also is said to be working with Kayne Anderson to acquire the rest of the site.