Chesterton Tribune

Would-be partner for LEL's Coffee Creek Center has money troubles

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By KEVIN NEVERS

James Gierczyk —the Illinois developer whose LLC, Chesterton Development Partners (CDP), was going to breathe new life and transfuse fresh blood into Coffee Creek Center—appears to have cash-flow problems.

Not only is Giercyzk in hock to Old Second National Bank of Chicago Heights, Ill.—according to a lawsuit filed on May 19 in Porter Superior Court—to the tune of $12 million.

Four of his other LLCs have also been sued by another creditor, the First Bank and Trust Company of Palatine, Ill., which alleged that he defaulted on loans totaling $31.6 million and owed in excess of $22.5 million in principal, interest, and late fees.

First Bank and Trust has accused Gierczyk as well of transferring assets to his wife with “intent to hinder, delay, or defraud his creditors.”

Meanwhile, Giercyzk’s legal firm has sued him in an attempt to recover more than $250,000 in legal fees and litigation expenses which the firm claims Giercyzk refused to pay.

And Crain’s reported last month that Wheatland Bank of Naperville, Ill., has filed foreclosure suits on three of Giercyzk’s suburban strip-mill developments in that state.

Notwithstanding his hideously off-putting billboards once seen in the region—the bald ugly baby—Gierczyk was making a reputation for himself, four years ago, as the developer of upscale waterfront projects in New Buffalo, Mich., boutique condos with names like Light Harbor Moorings and Light Harbor Preserve.

So when, in 2006, Gierczyk came to Chesterton to do business, through CDP LLC, it was with the expectation that he would use his clout to get stuff built there. That, at any rate, is how Lake Erie Land Company (LEL) spokesman Tom Godfrey put it at the time. “Part of (Gierczyk’s) responsibility is to bring the builders and get things built,” Godfrey said then. “He’s basically utilizing his vast network of builders and contractors in that industry to participate in that.”

Actually, Gierczyk’s relationship with LEL was twofold, a source familiar with it has told the Chesterton Tribune. On the one hand, there was a joint venture to develop two pieces of LEL property in particular: one located west of Ind. 49 across from Coffee Creek Center, the other north of I-94.

On the other hand, there was a separate obligation to purchase, each year over the deal’s 10-year lifetime, a certain acreage from LEL, and in fact CDP did acquire not only the Sand Creek Country Club but 18 residential lots in the Estates of Sand Creek and 42 commercial acres in Coffee Creek Center proper, located east of Ind. 49 and between Gateway Blvd. and Voyage Blvd. It was on those 42 acres that PBR Development of Chicago proposed, in the summer of 2006, building a 380,317-square foot retail mall.

That went nowhere fast.

It was also those 18 lots in Sand Creek and 42 acres in Coffee Creek Center which Gierczyk mortgaged two years later, in October 2008, to secure an $11.9 million loan from Old Second National Bank. That loan matured on Jan. 10, 2010, and when—Old Second alleges—Gierczyk’s CDP LLC failed to pay it, the bank filed suit against him last week, seeking a judge’s order to foreclose on that property. Named in that suit as well is are host of other entitites—including LEL, the Coffee Creek Homeowners Association, Sand Creek Country Club Real Property, and Centier Bank—none of which is on the hook in any way for the loan but all of which have some interest in the property in question and were accordingly included in the filing “to answer as to” those interests.

As it happens, $11.9 million is the value of real-estate assets—namely, Sand Creek Country Club and unspecified acreage at Coffee Creek Center—which NiSource Inc. had classified since 2006 as discontinued operations held for sale.

As NiSource announced, however, in its annual report filed earlier this year with the U.S. Securities and Exchange Commission, Gierczyk—through CDP LLC—failed in the second quarter of 2009 to make a scheduled payment to LEL for that property, prompting NiSource to record a $16.6 million impairment loss in the fourth quarter of the year. That impairment consisted of $8.8 million in uncollectable receivables owed by CDP and a further $7.8 million, the amount by which the book value of the assets remaining to be sold under the agreement exceeds the fair value.

So that’s the end of that.

While he was here, though, Gierczyk floated a couple of ideas. He wanted the Town of Chesterton to issue a financial instrument known as special improvement bonds—“dirt bonds,” as they’re called—under which an additional tax is levied on lots in a designated district, the revenues from which he would have used for the development of 200 townhomes at Coffee Creek Center. Special improvement bonds are supposed to encourage development by freeing the developer from the pesky up-front costs of typical bank financing. That went nowhere fast.

Gierczyk also suggested the use of tax increment financing moneys to pay for infrastructuring the chunk of property owned by LEL west of Ind. 49. At the time Wal-Mart was mentioned in connection with that property. And that too went nowhere fast, at least partially because, as a general policy, the Chesterton Redevelopment Commission has been opposed to using TIF revenues to build infrastructure for private developers.

The one fruit of LEL’s relationship with Gierczyk: the Village Green Townhomes at Coffee Creek Center.

As uneventful as Gierczyk’s time in Chesterton was, in Illinois things started happening for him in the summer of 2008, when—according to First Bank and Trust Company’s lawsuit—Gierczyk defaulted on separate loans to four of his LLCs: a December 2003 loan for $2.6 million to First JPG Development; an April 2004 loan for $6 million to Lighthouse Place Development; an April 2005 loan for $6 million to Gierczyk-Ghezzi Cottages; and a February 2006 loan for $18 million to Light House Preserve. All were due on June 30 or Sept. 30 of that year, First Bank and Trust alleged in the suit, which sought a total of $22,863,868.53 in principal, interest, and late fees.

A year later, in September 2009, First Bank and Trust Company sued Gierczyk’s wife, alleging that Gierczyk had transferred to her and to an LLC of which she was the registered agent numerous assets, including $243,516.50 in proceeds from an IRS tax refund $523,683.42 in proceeds from a certificate of deposit; Real property in Tinley Park, Ill., for which the purchase price was $1.85 million; lots located in the Estates of Sand Creek here in Chesterton; and a 2007 Lincoln Navigator, a 2002 Chevrolet truck, and a 2006 Grand Jeep Cherokee. First Bank and Trust Company further alleged that Gierczyk made those transfers with “the actual intent to hinder, delay, or defraud his creditors such as First Bank.”

A few months later, in January 2010, the legal firm Shaw Gussis Fishman Glantz Wolfson & Towbin sued Gierczyk, alleging that he has refused to pay a legal bill, incurred between February 2005 and August 2008, of $256,945.38.

 

Posted 5/27/2010