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Posted: Saturday, 04 July 2009 8:14AM
Union bets $500 million on Olympic Village plan
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CHICAGO (STNG) -- A powerful union is betting big time on Mayor Daley's Olympic dream.
This week, Daley took an $86 million gamble with taxpayers' money that a moribund housing market will come roaring back -- by closing on the purchase of Michael Reese Hospital to pave the way for construction of a $1.1 billion Olympic Village.
That's a drop in the bucket compared with the risk the AFL-CIO is about to take with its pension funds.
The AFL-CIO investment trusts and the labor-owned Union Labor Life Insurance Co. have signed a "letter of commitment" to pump $500 million into building the Olympic Village, a project alternately viewed as the riskiest element of Chicago's Olympic bid and its enduring "physical legacy."
Olympic Village projects in London and Vancouver have run into trouble because of the worldwide credit crunch, forcing both cities to ride to the rescue.
The labor organization's investment could help shield Chicago from a similar disaster. It also bolsters the chances City Hall will succeed in unloading the Reese property to a master developer during the five-year window when neither principal nor interest payments are due on the 15-year, $86 million loan.
Daley plans to forge ahead with the new lakefront community -- with a mix of affordable, market-rate, student and senior housing --with or without the 2016 Summer Games. The union's investment would be contingent on Chicago winning the Olympic sweepstakes.
The deal was engineered by Tom Villanova, president of the Chicago and Cook County Building & Construction Trades Council.
Villanova was the first and, for a while, the only union representative on Chicago's Olympic organizing committee. Not coincidentally, his union gave Daley's 2007 re-election bid its only labor endorsement.
"It's a win-win situation for the unions because we get all the work building the Olympic Village, and it's a good investment in a beautiful, high-profile project on the lake," Villanova said.
Villanova denied that the investment was risky, despite the housing slowdown and glut of unsold units.
Chicago's downtown condo market has an inventory of 1,167 unsold units. Nearly 2,200 more under construction also remain unsold.
"These units are not gonna be put on the market for quite a while. Hopefully, the market has turned around in that time," Villanova said.
"The people who know that business obviously think it's gonna be fine. Otherwise, they wouldn't have sent the letter of commitment."
Sources said Villanova announced the union's contribution during closed-door briefings with aldermen last month, designed to calm the furor over Daley's pledge to sign an open-ended financial guarantee from Chicago taxpayers.
Villanova's presence with Chicago 2016 Chairman Pat Ryan served as a warning: Aldermen contemplating derailing Chicago's bid do so at the risk of alienating union leaders.
Sources said the insurance company would serve as a lender to various developers working on everything from housing to retail buildings in the village.
The project calls for as many as 2,600 units in 21 residential buildings, each 12 stories high. The units would be retrofitted for permanent occupancy after they are used to house 16,000 Olympic athletes during the 2016 Summer Games.
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