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Rauner orders grant refunded to state

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Illinois

Gov. Bruce Rauner on Monday ordered a clout-heavy Chicago TV and movie studio to give back a $10 million state grant that his predecessor, Pat Quinn, had awarded to the studio’s owners to buy land that isn’t for sale.

The Rauner administration’s action came one day after the Chicago Sun-Times revealed that owners of six of the seven properties listed in the grant say they have no plans to sell their land to Cinespace Chicago Film Studios or anybody else. There’s no indication the seventh property is for sale, either.

Quinn’s administration, the Sun-Times also found, awarded the $10 million without any appraisals to justify the projected purchase prices listed by the studio’s owners.

Additionally, the former governor’s Department of Commerce and Economic opportunity had nothing to show that Cinespace had pending contracts to buy any of the properties — or even had been in negotiations to buy them, according to documents obtained under the Illinois Freedom of Information Act.

* We can talk about the value of these sorts of grants or even this particular grant, but there is some context here…

The former [Pat Quinn] aide, speaking only on the condition of anonymity, notes that the $10 million grant expires on June 30 and that Cinespace would have to repay any of the money it hasn’t spent.

The aide says it’s common practice for the state to write lump-sum grant checks to businesses like Cinespace that bring jobs to Illinois — particularly when the grants involve buying land.

“To get these deals done, you have to have liquidity,” the aide says. “There was quite a bit of due diligence and discussion, which is totally in keeping with these types of grants.” […]

Under the grant, Cinespace is required to put in twice as much of its own money as it spends from the state grant. That’s to go toward land acquisition and rehabilitation, as well as free rent for college film programs, including those at DePaul University and Columbia College Chicago.

Cinespace is a family-owned business run by former real estate developer Alex Pissios. It has used the millions of dollars it’s gotten from the state to turn what once was a Ryerson steel mill in North Lawndale into what the company touts as the biggest film studio east of Los Angeles.

posted by Rich Miller
Tuesday, Mar 24, 15 @ 9:51 am

Comments

“there was quite a bit of due diligence…”

um, no, not at all. not when the parcels are not for sale, and there were no appraisals.

Comment by Langhorne Tuesday, Mar 24, 15 @ 9:56 am
===not when the parcels are not for sale===

Lots of parcels aren’t for sale until somebody comes along with some cash. That doesn’t bother me too awful much.

Comment by Rich Miller Tuesday, Mar 24, 15 @ 9:58 am
Question is now what will Quinn have to give back to the Studio?

Comment by ROLLO TOMASI Tuesday, Mar 24, 15 @ 9:58 am
Anyone can make an offer, with contingencies, without actually having the cash in their account. It’s done all the time.

Comment by Apocalypse Now Tuesday, Mar 24, 15 @ 10:00 am
The state shouldn’t be in the venture capital business. It’s nothing but multi-million-dollar press releases for governors and corporate welfare for the connected.

If you want to target state deposits to leverage private small business loans, that’s another story. But these direct cash grants are just screaming to be abused.

I hope our private equity governor will spot the scam and refrain from giving out grants like this.

Comment by Wordslinger Tuesday, Mar 24, 15 @ 10:04 am
Two of those parcels were recently purchased by other buyers. Connect the dots. From the original story:

• 1414 S. Western Ave. — a multilevel industrial building with a leaky roof, broken windows and delivery dock that floods, according to an earlier appraisal, filed with Cook County in 2012. In mid-December, a company owned by car dealer Joseph Perillo bought the property for $1.9 million.

Cinespace told state officials it hoped to buy the property by March 31 for $3.7 million — including $3.6 million from the state grant. Perillo says he has never spoken with anyone from Cinespace about selling the property and has no plans to sell it.

• 2643 W. 19th St. — a dilapidated warehouse that a company called B&J Wire sold for $601,000 on Jan. 30 to Vinod Patel, whose sons plan to convert it into an industrial laundry business serving downtown hotels. Cinespace told the state it was aiming to buy the site by June 30 for $650,000 — $500,000 of that out of the state money.

“We’re not planning on selling,” says Nayan Patel, one of Vinod Patel’s sons. “We just closed on the property in January.”

Comment by Interested Observer Tuesday, Mar 24, 15 @ 10:04 am
Sometimes, it really is all about the optics. Stop trying to defend this.

Comment by JB13 Tuesday, Mar 24, 15 @ 10:07 am
==Anyone can make an offer, with contingencies, without actually having the cash in their account. It’s done all the time.==

This. It’s not uncommon for real estate purchase agreements to be entered into with closing contingent on obtaining financing, either by private lenders or by the State. It doesn’t even appear there was even an agreement to enter into sale agreement negotiations, meaning there was nothing beyond fishing for properties. If they haven’t even reached that level of serious talk and agreement, the State shouldn’t be handing out the money yet.

Comment by Anonymoiis Tuesday, Mar 24, 15 @ 10:07 am
$10 Million would sure help with subsidized childcare programs, prisons and court reporters.

Comment by Jolly1 Tuesday, Mar 24, 15 @ 10:09 am
That Quinn largess never stops giving, does it? Good for Rauner. Get the money back and repurpose it to any of the glaring needs we now face.

Comment by A guy Tuesday, Mar 24, 15 @ 10:09 am
Or, we could just organize a write-in campaign to bring back “Playboy Club.”

Comment by ChrisB Tuesday, Mar 24, 15 @ 10:11 am
The banking issue is the more interesting angle here.

The bank where the funds were parked is owned by a Quinn supporter.

I admit that I’m not an expert in banking, but it seems that having $10 million parked there is good for the bank’s business.

Was this really about buying land, or directing funds to support Quinn-friendly banker?

This is one of those things where it might be mere coincidence, but this is Illinois.

Comment by Gooner Tuesday, Mar 24, 15 @ 10:11 am
“I hereby order grant money that is going to be returned to be returned sooner. So sayeth the gov.”

Comment by Ducky LaMoore Tuesday, Mar 24, 15 @ 10:13 am
Ok. Demand it back early. Looks good for Rauner, bad for Quinn. It was due to be refunded in three months anyway.

However, this is a small part of a real success story.

One of the ways the Mayor of Chicago, and Governor of Illinois have succeeded in building up Chicago is to attract Hollywood here. A lot of shows have, are, and will be shot here. That even helps maintain Chicago as a world-class city in modern culture.

This is right in Rahm’s wheelhouse, with his Hollywood connections, as well.

Comment by walker Tuesday, Mar 24, 15 @ 10:22 am
Gooner is right about the banking angle. The article in the Sun-Times also states that the movie company has received millions in loans from Belmont Bank & Trust which is owned by James J. Banks, effective in 2006. This Banks is the brother of the former alderman in City of Chicago with great zoning power - their sister works for Cinespace and on the board is former Sen. Jimmy DeLeo and Fred Barbara of City of Chicago garbage hauling fortune. Speaking of garbage, all those connections make this all seem pretty smelly. Perhaps the grant went to Belmont in payment of those loans and the money will not come back to the State no matter how hard the Gov. tries to get it. As they say — follow the money …

Comment by Gone, but not forgotten Tuesday, Mar 24, 15 @ 10:24 am
+++Get the money back and repurpose it to any of the glaring needs we now face.+++

Yep, like court costs!

Comment by Anon Tuesday, Mar 24, 15 @ 10:30 am
Gone, but not forgotten: Thanks for your info above.

“Mob” money in Hollywood — modern version.

Who’d a thought it?/s

Comment by walker Tuesday, Mar 24, 15 @ 10:35 am
Good that the corrupt PaT Quinn lost in 2014.. handing out 10 Million money for a non deal from a broke state like Illinois..
Rauner continues to shine lights on the corrupt deals from the past 10 years .. God Bless Him

Comment by better days Tuesday, Mar 24, 15 @ 10:35 am
Illinois Democrats and Quinn had their own Cosa Nostra with wasting Illinois taxpayer money

Comment by better days Tuesday, Mar 24, 15 @ 10:38 am
This grant should not have been given in the middle of a budget ==crisis== like this. Maybe never, even under better conditions.

But, now that is has been, it should be returned when due in June. If the money has been used for operating purposes and not sitting in escrow, the original terms should have required interest repaid as well.

The bigger questions here are: Why did it take the media to notice this rather than the state? How many more ==grants== like this are there? The timing of this grant and the money trail to the bank also raise some big questions.

Comment by Formerly Known As... Tuesday, Mar 24, 15 @ 10:40 am
Agree with Walker on this generally.
The movie and TV business is a big deal for cities and states.

TV shows like “The Good Wife” is supposed to take place here but most of it is filmed in Toronto which looks like Chicago but it is cheaper to work there—-and yes it is colder there too.

Rauner just brought in a new person for his film office. I imagine that person wants to cut their own deals.

Plus, the City has been chomping at the bit to develop the southside parcel for over 10 years since they feel it will enhance the area and bring money to the City and that specific area.

The involvement of the Banks Family? Aren’t they everywhere in the City?

Comment by Belle Tuesday, Mar 24, 15 @ 10:40 am
Brucie’s afraid they would have used union labor!

Comment by D.P.Gumby Tuesday, Mar 24, 15 @ 10:51 am
I see a long protracted lawsuit and years before any money is returned. If the grant was this loose then most likely the grant language was too.

Comment by Sir Reel Tuesday, Mar 24, 15 @ 11:03 am
=Good for Rauner. Get the money back and repurpose it to any of the glaring needs we now face.= Yes. like more free motorcycle license classes.

Comment by JS Mill Tuesday, Mar 24, 15 @ 11:03 am
Has anyone been over to Cinespace? Its an impressive facility and I know they have ambitious plans for the number of shows shot there. In addition to Chicago Fire, Chicago PD and Sirens, they also shoot EMPIRE there. Next year they will be adding Chicago MED, it can be a huge economic engine.

Comment by wndycty Tuesday, Mar 24, 15 @ 11:05 am
==sold for $601,000 on Jan. 30==

The property sells to someone else. Nearly two months after Cinespace receives a state grant to buy that property. While some of the other property owners still have yet to hear a word from Cinespace.

There could be a reason, but that does not look much like an active or interested buyer.

Comment by Formerly Known As... Tuesday, Mar 24, 15 @ 11:12 am
I do not understand this at all. Was the bank under scrutiny for inadequate deposits?

Comment by Soccermom Tuesday, Mar 24, 15 @ 11:17 am
=== Belle - Tuesday, Mar 24, 15 @ 10:40 am:===

The biggest reason for Toronto are both TV and film are notorious for very long days of work. Labor laws prevent directors from working as they are accustomed in the US. There are many things that are actually more expensive about production in Canada, but it’s still cheaper by far on the labor side. There’s a lot of ancillary labor in film production. Toronto and Vancouver have done very well as a result.

Comment by A guy Tuesday, Mar 24, 15 @ 11:20 am
How many movies are in the works at this studio? How much interest has Hollywood have in shooting a movie or 2 in the Chicago area so that this studio can be put to good use? If there is nothing in it for the area it’s just a sham.

Comment by Ginhouse Tommy Tuesday, Mar 24, 15 @ 11:33 am
- ROLLO TOMASI - Tuesday, Mar 24, 15 @ 9:58 am:

–Probably a few staff assistants over at IDOT

Comment by Very Fed Up Tuesday, Mar 24, 15 @ 11:35 am
Does this go into the “win” column for Donna Arduin’s contract?

Comment by Steve Williams Tuesday, Mar 24, 15 @ 11:39 am
I’m not all worked up about this reaction to a Sun-Times report. Typical media/politics play. The reality is the state should be investing in infrastructure for growing industries in the state. I would include the movie/tv studio business in that category. We have 4 - 5 shows filming that create hundreds or direct jobs and probably thousands of indirect jobs. Two more pilots with chances for pick-up are currently being shot here in addition to the Chicago Med spin-off. This is good for Chicago jobs, image and desire to attact more tourists. The other reality is state grants don’t alaways get spent, and yes, by their terms, have to be returned by a date certain if left unspent. Rauner made a mountain out of a mole hill for favorable coverage. What else is new in politics?

Comment by Niles Township Tuesday, Mar 24, 15 @ 12:03 pm
Am I the ONLY person that has noticed that film production has broken ALL records in Illinois? I wonder why. The answer is Cinnespace and this project. Maybe the owners should just shut it down, and let all of the jobs leave the state

Comment by Just saying Tuesday, Mar 24, 15 @ 12:14 pm
Ginhouse Tommy. There are 4 television shows being shot in Chicago. Chicago Fire, P.D, Empire, and Sirens. They put a ton of people to work and the studio has generated over $300 million dollars in revenue. Give 10 to get 300+? Sounds like a good deal.

Comment by Anon Tuesday, Mar 24, 15 @ 12:17 pm
They say even a blind squirrel can find a nut occasionally but not on this thread. The state gives the company a $10 million cash grant for property it neither had a pending offer to purchase or under contract to purchase. That is red flag number one. Two of the parcels sell within 30 days of the cash payment to buyers other than the recipient of the cash grant. That is red flag number two. Do I have to spell it out to you? What do you want to bet that those properties would have been acquired before the June deadline if that whistle blower hadn’t tipped off the Sun-Times reporter before the property flipping for quick profit-taking commenced? The questions by the reporter blew up the deals in the making. Hello!

Comment by Interested Observer Tuesday, Mar 24, 15 @ 12:20 pm
Interested observer. Do u live on mars? Are you saying that properties are not EVER acquired in Chicago.? Plain as day. Before grant could be executed, SOMEONE else bought the properties in question. That’s what happens on earth.

Comment by Just saying Tuesday, Mar 24, 15 @ 12:26 pm
Yeah, Just saying, people are snatching up those “dilapidated warehouse[s]” and “industrial building[s] with a leaky roof, broken windows and delivery dock that floods” in run-down neighborhoods in a New York minute.

Comment by Interested Observer Tuesday, Mar 24, 15 @ 12:37 pm
Anon. As long as that is what it is used for and gives local talent a chance at making it, I completely agree.

Comment by Ginhouse Tommy Tuesday, Mar 24, 15 @ 12:42 pm
Gone, but not forgotten: Great comment.
Here is the link to the story.
http://chicago.suntimes.com/chicago-politics/7/71/301614/watchdogs-movie-studio-boss-pays-20k-debt-city-hall-sun-times-inquiries

Comment by Philo - Center of the Universe Tuesday, Mar 24, 15 @ 12:59 pm
==before the property flipping for quick profit-taking commenced==

Whatever the cause is, this looks odd.

Comment by Formerly Known As... Tuesday, Mar 24, 15 @ 12:59 pm
““I hereby order grant money that is going to be returned to be returned sooner. So sayeth the gov.” ”

Come and get it if you can.

Comment by Huh? Tuesday, Mar 24, 15 @ 1:03 pm
I wanna know who all these anonymous former aides are.

Comment by Not it Tuesday, Mar 24, 15 @ 3:35 pm
proof of other crimes–what ever happened to NRI?

Comment by 19th ward guy Tuesday, Mar 24, 15 @ 4:07 pm
The interest on $10M, even for a relatively short time has to add up to something, doesn’t it?

Comment by A guy Tuesday, Mar 24, 15 @ 4:46 pm
Interesting scenario posited by Interested Observer

Quick real estate flipping based on insider knowledge passed by politicians, to friends and otherwise connected players. The initial grant eventually does what it’s supposed to, but insiders make big money in the interim. We used to call this the “DuPage County Syndrome” when it occurred years ago among downstate and suburban pols and their RE investor friends and family. Why not in the city?

Comment by walker Tuesday, Mar 24, 15 @ 5:33 pm
Wow. Just read a headline in S-T that Cinespace returned the 10 mil plus interest. The characters of this scenario made this go away fast, probably with an agreement that we will never speak of this again.

Comment by Gone, but not forgotten Tuesday, Mar 24, 15 @ 5:36 pm
Walk, it was taken as fact when I was growing up that a GOP state senator, along with friends and families, miraculously managed to come into ownership of all the farmland in the path of the old I-5 extension from Aurora to Rochelle.

Then there’s the gag I read on this blog back in the day.

All Kenny Gray’s family and friends wanted to do was farm, but the federal government kept up buying their recently purchased farmland through eminent domain for cloverleafs to nowhere.

Comment by Wordslinger Tuesday, Mar 24, 15 @ 5:43 pm
Pat Quinn .. the REFORMER >>> LOL!!!!!!!!!!!!!!!!

Comment by better days Tuesday, Mar 24, 15 @ 6:48 pm
Word, if you can’t own the right of way, you move the road. Take a look at I-74 between Champaign and Peoria and you’ll see a couple non-standard tweaks in the roadway. Ah, the good old days.

Comment by Arthur Andersen Tuesday, Mar 24, 15 @ 7:55 pm
AA, the I-5 score was back in the day before Corn was King. Knowing that route through Kane, DeKalb and Ogle before ethanol and corn sweetener was like printing money.

Never heard the I-74 story, but not surprised, human nature being as it is.

Ever hear about Kenny Gray’s houseboat on The Potomac? Legend has it Wayne Hays and Liz Ray started a hot romance there’ that had serious complications back in the day when committee chairmanships meant something,

Say what you want about that lady, but she really couldnt thpe. Or answer the phone

That’s the old days, lol.

Comment by Wordslinger Tuesday, Mar 24, 15 @ 9:57 pm
DeLeo and his cronys again caught with there hand in the cookie jar. I hope they turn this over to the FBI.

Comment by time for change Wednesday, Mar 25, 15 @ 11:21 am