March 28, 2002
by Thomas A. Corfman
Tribune Staff Reporter

Fighting off foreclosure by his construction lenders, developer Raymond Chin on Wednesday won a key court ruling that boosts his chances of reviving his stalled $375 million, mixed-use project in Streeterville.

Work on the twin-tower Grand Pier development was halted in May because of a financial dispute with general contractor AMEC International. Fears of cost overruns of more than $14 million prompted LaSalle Bank to file a lawsuit in July to collect more than $20 million in construction financing for the first, $83 million phase of the massive project.

The ruling by Cook County Circuit Court Judge Robert J. Quinn does not mean that LaSalle will lose the foreclosure case, but it does mean that Chin could eventually win it, real estate legal experts said.

"Not only does Ray come back to fight again, but what was an open-and-shut case now has tremendous exposure for LaSalle," said Chicago attorney Bernard Edelman.

The case has been closely watched because some in the development community believe LaSalle was too quick to pull the trigger in foreclosing on the loan.

Some developers are quietly rooting for Chin to succeed in efforts to refinance the project and thwart the bank's attempt to force a foreclosure auction of the property.

The delay produced by Wednesday's ruling, some believe, favors Chin. Since the foreclosure suit was filed, the gritty developer has been working unsuccessfully on several potential deals that would arrange alternative financing for the project and pay off LaSalle.

Wednesday's ruling may strengthen Chin's hand in completing one of those transactions.

Also riding on the court ruling: a foreclosure case filed by Lehman Brothers, which provided $22.5 million in mezzanine financing. And if LaSalle had prevailed, it wanted to collect on $2.8 million loan guaranties signed by Chin and Grand Pier's investors: Sue Ling Gin, Chief Executive of Flying Food Group Inc.; and Linval Chung, President of Chicago-based Reliable Contracting & Equipment Co.

"The decision allows Grand Pier its day in court on its contention that it is not in default and that LaSalle breached its own agreement," said Stephen Novack of Chicago-based Novack and Macey, a high-powered litigation boutique that represents Grand Pier.

LaSalle would not comment.

The Chicago office of Minneapolis-based U.S. Bank and Chicago-based Liberty Bank for Savings also participated in the loan.

The loan was not in default because of any alleged failure to pay interest, or because the principal was due but had not been paid off. Rather, LaSalle primarily claimed that the loan was "out of balance" because there would not be enough money to pay the rising construction costs.

Before filing suit, the bank demanded that Grand Pier invest another $3 million in the project to make up for the shortfall.

Chin has denied that the loan was out of balance.

Judge Quinn denied LaSalle Bank's motion for summary judgment, a disposition that is faster than a full-blown trial. Granting the motion would have paved the way for LaSalle to hold a foreclosure auction of the property, which includes an incomplete shell of a parking garage structure and street-level retail space that was once earmarked for a Dominick's supermarket.

Quinn ruled that there are too many important disputed issues in the case that must be decided at a trial.

Such a ruling is unusual because foreclosures are ordinarily cut and dried, even in cases involving tens of millions of dollars, real estate experts said.

In his written opinion, Quinn cited conflicting evidence on several key issues, including whether LaSalle gave proper notice of default and an opportunity for Chin to correct any alleged default.

But one issue that Quinn said had to be decided at trial goes to the heart of the case: whether or not the loan was actually in default.

"It could become a bank's worst nightmare," said real estate lawyer Edelman.