Bankrupt commercial owners forced to sell

By 1983, the commercial portion of Marina City was owned by Marina City Associates, a limited partnership led by Dallas investor Ellison Trine Starnes, Jr.

The 1980s were not kind to Starnes. In 1986, he defaulted on three business loans – totalling $77.5 million – from Silverado Savings and Loan, whose directors included Neil Bush, whose family included two U.S. presidents. The collapse of Silverado in 1988 cost taxpayers $1.6 billion.

In 1986, Starnes donated $30,000 to an organization that gave money to Oliver North, an official with the Reagan administration who was at the center of a scandal involving the clandestine sale of weapons to Iran. And he was a stockholder in West Belt National Bank, a Houston bank that was closed in 1989. (Left) Abilene Christian University Class of 1967 yearbook photo of E. Trine Starnes, Jr.

Charles Swibel had sold the last of the commercial property, the 16-story office building, to the partnership in 1983 for $11.6 million. It had cost at least $10 million to build. But with no equity in the property, it was an $11.6 million profit for Swibel.

Continental Savings Association may have identified Starnes to Swibel as a potential buyer. Howard Swibel says Continental loaned his father, Charles Swibel, all of the money to purchase the commercial property at Marina City in 1977.

Why did he want to sell? Says Howard, it was “an offer he couldn’t refuse.”

Charles Swibel continued to manage the commercial property for Starnes for at least three years after he sold it to him. “They definitely sought his advice. He gave them advice about tenants because he was the one who had most of the connections with the tenants.”

The residential property had been sold as condominium units in 1977, making for Swibel what the Chicago Tribune described as “a financial killing.”

One of the first things Starnes did when he took over the property was to evict many of the office and retail tenants, in order to renovate the complex. However, the renovation ran into financial problems and Marina City Associates fell behind on its mortgage payments.

Says Howard Swibel, “These people had represented themselves as being savvy operators. And then they got themselves into financial distress.”

Howard thinks his father felt bad about the problems because people blamed him, even though by that time he was not involved and had no control over it.

Continental Savings Association of Houston, which held the $12.5 million mortgage, filed for foreclosure in 1987. But they were declared insolvent and taken over by the now-defunct Federal Savings and Loan Insurance Corporation.

Before the foreclosure could take place, Marina City Associates declared bankruptcy in 1988 and – because a bankruptcy takes precedence over a foreclosure – the property was put under the control of a federal bankruptcy trustee.

On November 3, 1988, it was announced that the commercial property – everything except the residential towers – would be sold at an auction later in the month. This included the 19-story parking garage at the base of each tower, the commercial block below the ramps which mostly consisted of Marina City Restaurant, the 500-slip marina below that, the office building which was only 15 percent occupied, and the vacant 1,350-seat theater building.

Seay & Thomas Inc., a Chicago real estate firm, was hired to sell the property. They hired an Indiana company, Kruse International, to conduct the auction. According to the prospectus sent to potential bidders, the commercial property was “ideal for redevelopment with potential for over one million square feet of development.”

At 11:00 a.m. on November 22, bidders gathered at the Hyatt Regency Chicago hotel a few blocks from Marina City, each bringing a certified check for $1 million as earnest money.

Kruse had said the value of the commercial property could be as high as $200 million. This was much higher than what the property actually sold for, $22.7 million.

Matas Corporation, a north suburban office development firm, was the successful bidder. It was their first venture into downtown real estate. Their most recent development had been a $90 million office park in Deerfield, Illinois.

Without going into details, they announced major renovation plans for the property. “We feel the property has tremendous upside potential,” Steven G. Levin, vice president of Matas, told the Chicago Tribune. “A lot of things are beginning to happen along the Chicago River, and we’re excited that we are going to be part of it.”

But before closing on the deal, Matas Corporation backed out, without public comment.

Levin (left) is currently president of Brijus Properties, a real estate investment and development firm.