By Stephanie Sims
The Ritz-Carlton Residences are almost finished, but a legal battle could prevent residents from moving in.
Chicago-based Prism Development Co., the developer of the 89-unit condominium tower, and Terra Foundation for American Art, which owns the land at 664 N. Michigan Ave. and will own retail and office space in the project when it is finished, have reportedly been feuding, but on Friday, it reached a new level when Prism prevented construction workers from entering the building.
Ritz-Carlton Residences Feud
The Terra Foundation is building the retail stores Tommy Bahama and Loft, which will be located at the base of the building. Tommy Bahama signed a lease for about 4,000 square feet of space in the project, while Loft will occupy about 8,000 square feet.
Terra Foundation responded to Prism by seeking a temporary restraining order on Monday, which forced Prism to let workers in. In addition, according to Crain’s, a hearing was held Monday afternoon and a judge issued an order that will allow construction workers, the retail tenants and Terra to enter the building through the end of the week.
How It Got To This Point
Terra first was the owner of a vintage building on the property, and in 2005, agreed to let Prism tear down the old building while keeping the facade and build the Ritz-Carlton property. As part of the agreement, Terra would own about 18,000 square feet of street-level and second-floor retail space and 14,000 square feet of office space within the new building.
But Terra says now it won’t close on the deal because Prism hasn’t completed the space to the foundation’s satisfaction. Its main complaints, according to Crain’s, are that work on elevators between the first and second floors is incomplete and the windows of the future offices were improperly installed. Terra’s refusal to close prevents the developer from taking title to the residential and parking portions of the projects. Until that happens, residents who have signed contracts to buy condos in the building can’t close on their units.
Trouble in Paradise for Ritz-Carlton Residences?
With forty-two out of the 89 condos in the building under contract as of the second quarter, according to a recent report from Appraisal Research Counselors, this creates a big problem for Prism, as well as for selling the remaining units. In addition, Prism believes the work on Terra’s space is complete, and the two parties also can’t agree on the value of the retail space.
Last week, Prism sent a letter demanding that Terra close on the 2005 deal, lawyer Eric Macey, partner at Chicago-based Novack & Macey LLP, who represents Terra, told Crain’s.
“In the final stages of any construction project of this scale, some issues may arise between the parties which need to be finalized before turning the property over to its future owners and tenants,” a statement from Prism said. “We hope to shortly conclude as much of this process as possible, privately, showing respect and courtesy to all stakeholders.”
Prism plans to oppose an extension of the restraining order at a court hearing scheduled for Friday. What do you think, readers – will these two parties be able to compromise? Will there be a happy ending sooner, rather than later, for the buyers who have signed contracts? Will this put a damper on selling the remaining Ritz-Carlton Residences units?