Pension Fund Denies Sterling Bay’s Ask For A Lincoln Yards Financial Injection
The Chicago Teachers' Pension Fund has rejected Sterling Bay’s pitch to invest in the Lincoln Yards project — a financial shot in the arm it sorely needed with its megadevelopment stalled only feet off the ground.
“After careful deliberation, it became evident that the investment did not align seamlessly with the goals of our Fund,” Jeffery Blackwell, president of the CTPF Board of Trustees, said in a press release. “There were many positive aspects of the development, but ultimately it was not the right fit for CTPF, as we are overallocated in our real estate portfolio.”
Sterling Bay was seeking as much as $300M to inject life into its dormant $6B Lincoln Yards development. The CTPF would have been the primary financial backer of the massive 14.5M SF development along the North Branch of the Chicago River between Lincoln Park and Bucktown.
The developer broke ground on Lincoln Yards in 2021, setting an anticipated completion date in 2031. City roadblocks have delayed that timeline by three years, Sterling Bay CEO Andy Gloor previously told Bloomberg.
The failed pitch to CTPF hits especially hard for Sterling Bay now that two of its key financial backers for the development — J.P. Morgan Asset Management and Lone Star Funds — are looking to sell their stakes in the project at significant discounts, Crain’s Chicago Business reported.
In a statement to Crain's, a Sterling Bay spokeswoman said the developer “is engaged in ongoing conversations with several parties interested in investment, financing and leasing at Lincoln Yards and is committed to advancing the project and the many public benefits it will deliver to the city of Chicago.”
Sterling Bay and project development partner Manulife Investment Management made a proposal to CTPF’s investment committee on May 23, according to the pension fund’s press release. After the pitch, the committee recommended its board authorize an investigation into the potential investment.
At its full meeting June 15, the board tapped investment consultant Callan to research the proposal and report back. But after Callan’s vetting process and a presentation to the board, CTPF declined to take further action on the proposal following what it characterized as careful consideration of the research and extended debate.
“As fiduciaries, CTPF believes in thoroughly evaluating all potential investment opportunities to ensure they align with the Fund’s strategic goals and principles,” Fernando Vinzons, chief investment officer for the fund, said in the release. “CTPF maintains a rigorous process that ultimately allows the Board to make informed decisions, and we saw that play out with this opportunity.”
CTPF was never a picture-perfect partner for Sterling Bay, as the CTPF invests on behalf of the Chicago Teachers Union. The CTU has significant influence over the pension’s investment decisions and has demonstrated opposition to the Lincoln Yards project, per Crain’s.
In 2019, nine teachers were arrested outside of Sterling Bay’s West Loop office after a Chicago Teachers Union sit-in at the headquarters, Block Club Chicago reported. The CTU argued that the tax increment financing dollars the city allocated for the megadevelopment should go to its schools.
Sterling Bay is already grappling with loan challenges at a couple of other buildings, including Groupon's headquarters — which will be vacated in early 2024 — on the east side of the Chicago River's North Branch and the two-tower Prudential Plaza overlooking Millennium Park.
