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Sterling Bay Calls On Pension Fund To Bail Out Lincoln Yards Project

Sterling Bay has approached the Chicago Teachers' Pension Fund to recapitalize the stalled $6B Lincoln Yards megadevelopment as it struggles to hold onto key pieces of its Chicago real estate empire.

The prominent Chicago-based developer pitched the deal to pension fund investors late last month, Crain’s Chicago Business reported. The fund’s investment committee then voted to investigate the possibility of becoming a financial partner in the 14.5M SF development, a move that would subject original Lincoln Yards backers to substantial losses, Crain’s reported.

A portion of Sterling Bay's Lincoln Yards proposal

The $12.1B pension fund would commit upward of $300M to the project, or between $100 and $150 per SF, according to video of the May 23 presentation and investor documents, replacing original investors at a deep discount.

If it happens, the cash infusion would throw Sterling Bay a lifeline as it struggles with loan challenges at a number of buildings, including Groupon's soon-to-be-vacated headquarters on the east side of the Chicago River's North Branch and the two-tower Prudential Plaza overlooking Millennium Park.

Crain’s also revealed Sterling Bay is seeking to consolidate ownership of the 53-acre Lincoln Yards site not just by securing a new capital partner but also by tapping its own investors for more money, seeking $25M for an "annex fund" to supplement what CTPF or another partner would kick in. It is also working with its lender to resolve a $126M mortgage tied to a large portion of the property that is set to mature June 20.

"It's an unbelievable, generational opportunity to invest in the city," Sterling Bay CEO Andy Gloor told members of the CTPF Investment Committee during the May 23 meeting, per Crain's, calling Lincoln Yards "the most important deal we've ever done." 

Gloor’s presentation was made in tandem with Canadian firm Manulife Investment Management, which was unveiled as a new development partner on the project, Crain’s reported.

The ambitious, sprawling Lincoln Yards project could generate billions in tax revenue and thousands of jobs over the next couple of decades. But its current position highlights the environment many commercial property owners are up against: flagging demand for office, high interest rates and falling property values that have made refinancing an often fruitless scramble.

In an interview with Bloomberg last month, Gloor said the life sciences hub would need to be recapitalized, placing heavy blame on slow permitting that wreaked havoc with its construction timeline. At that time, Gloor said he had refinancing interest from private individuals lined up, but he called out former Mayor Lori Lightfoot, who he said “put a brake” on the project.

“She fought the development, which is so puzzling to me because the economic impact in terms of construction jobs, permanent jobs and the ability to compete with some other cities, it’s in the $8[B] to $10B [range] if you add it all up,” Gloor told Bloomberg. 

Sterling Bay broke ground on Lincoln Yards in 2021, anticipating a 10-year construction timeline for the 14M SF development. City delays have pushed that back three years, Gloor said.

CTPF Chief Investment Officer Fernando Vinzons told Crain's its commitment to Lincoln Yards is only “conceptual at this point.” Sign-off from its investment committee and board of trustees could take months, he said.