River East Center Moves Forward with $56M in Financing

This comes almost six months after MCL Cos. defaulted on a $300-million construction loan, reinsured against default by Mitsui Sumitomo Insurance. To avoid a formal foreclosure proceeding in court, MCL signed over the title to River East Center I, the two-tower structure that includes a 455-room Embassy Suites Hotel, 620-unit condo tower, 257,530 sf of retail space and a 1,142-stall parking garage. However, Fremont's loan is secured only by the retail and parking components of the project.

The initial funding of $48 million was used to retire existing mechanics' liens, pay outstanding tenant improvements and delinquent property taxes, and pay off MCL's partners. Some $8 million will be available to fund ongoing retail leasing and demising costs. Sources say interviewing for potential developers to take over the retail leasing is already under way; MCL will still manage River East Center I.

The property's location, in-place cash flow, and the financial strength of the project's new sponsorship helped seal the financing despite poor leasing momentum and a miserable overall market.

Mitsui also took title to the site to the east of River East Center I that includes the former Kraft Building on North Peshtigo Court and two sites along Lake Shore Drive south of Ogden Slip. MCL will hold on to the River View development, with plans to resume construction on phase 2. He will also retain River East Plaza, the loft office/retailing building at 401-465 E. Illinois St.

MCL has been scrambling to refinance River East for the past several months. Edinburgh, Scotland-based Royal Bank of Scotland provided the $300-million construction loan in 1999, and MCL Cos. has been in default since the loan matured last September.