State toll highway officials have been reluctant to crack down on the politically connected developer that renovated and runs the tollway oases even as the company’s back rent and other obligations have grown to nearly $1 million over the last year.
Wilton Partners and the tollway have been in extended discussions over how to deal with the firm’s lack of payments to the tollway, construction disputes and angry oases tenants who say Wilton charges them too much for their leases.
Despite its hard line with tenants, Wilton has not made its monthly rental payment to the tollway agency since June 1, 2006. But the tollway got some of the money it was owed after the Tribune asked the agency about rental payments in February.
Joelle McGinnis, spokeswoman for the Illinois State Toll Highway Authority, said the newspaper’s Freedom of Information Act request was used as leverage to push Wilton into converting $400,000 of its construction security deposit to cover back rent so the firm would “look better” to the public.
The tollway had another way to take the deposit for back rent — by declaring Wilton in default of its contract. But it never chose that option.
Brian McPartlin, the tollway’s executive director, said any deference shown to Wilton was not to benefit the firm but to allow tollway users to continue to take advantage of oases services. Asked why the tollway never declared default, he said the tollway has no desire to resume running the oases and noted that Wilton took the financial risk of the development.
“These folks have the right to have an opportunity to turn it around if they can,” McPartlin said of Wilton. He said the lease deal was never envisioned to be a “revenue generator” for the tollway, but rather a way to continue offering motorists a service while getting the agency out of “the oases business.”
Wilton officials did not return calls seeking comment.
The oases problems raise questions about the viability of what the state has billed an “innovative public-private partnership.”
Transforming oases
Wilton, a Los Angeles-based retail developer, took out an $83.2 million loan to renovate the tollway’s seven oases and transformed them from 1950s relics that had become dank and sometimes hazardous, into airy, people-friendly stops resembling shopping mall food courts. Under the terms of a 25-year lease that began in 2003, Wilton manages the properties and charges rent to tenants providing food and services.
But some tenants have left amid complaints that foot traffic and sales have not lived up to billing or to the rents being charged. Critics say the modernized oases are nicer but no longer relevant because the leisure travelers of the 1960s have been replaced by suburban and city commuters.
Although Wilton has struggled, the tollway says, a separate lease with ExxonMobil for gas station services at the oases has been successful.
The Wilton lease began under Republican George Ryan’s administration, but the project took off under Democratic Gov. Rod Blagojevich in 2003. Blagojevich heralded the project as “symbolic of the tollway’s reform agenda” when the first remodeled oases opened in June 2004. But the company became part of an ethics controversy that has dogged Blagojevich.
Wilton has given Blagojevich nearly $85,000 in campaign contributions and the firm gave oases space to business partners of one of the governor’s top advisers and fundraisers, Antoin “Tony” Rezko, who was indicted last fall on federal corruption charges. A Wilton subsidiary also gave a loan to another Rezko business partner after an introduction from Rezko.
Tollway officials said political considerations were not a factor in dealing with Wilton and said the governor’s office has not been involved in their lease discussions with the firm.
Rent, fees owed
Under terms of its lease with the tollway, Wilton is supposed to pay a base rent of $61,917 a month, or $743,000 a year, into the tollway’s general operating budget. But documents showed Wilton stopped making scheduled payments after June 1 of last year. Even after $400,000 of Wilton’s construction security deposit was applied to back rent and late fees in March, the firm still has not made a scheduled monthly payment and owes $352,426 in base rent plus late fees to cover January through June of this year.
Wilton also has fallen behind on payments it is required to make into a special maintenance fund for oases repair and renovation based on 1 percent of sales at the oases. The tollway threatened Wilton with default after it missed nearly a year of payments, and the firm resumed making its scheduled monthly maintenance payments in January. It still owes the tollway $532,000, tollway officials said. The tollway contends it is also owed $88,000 for parking lot repairs.
In addition to the rental and repair payments, records show Wilton has not paid more than $51,000 in oases real estate taxes in Cook and DeKalb Counties as required by the lease. Tollway officials said they were unaware of the problem.
In a June 2006 letter, Wilton acknowledged its financial struggle at the tollway and blamed the problem in part on the agency.
Michael J. Kelley, an attorney with the law firm of Freeborn & Peters, wrote that his client was “uncertain it can achieve even a short term extension” of its construction loan due to low foot traffic. Kelley contended that construction related to Blagojevich’s other major tollway initiative, open-road tolling aimed at speeding motorists along the system, was partially at fault.
Tollway officials offered more than $1 million worth of incentives to “buy Wilton time to get its house in order,” documents showed, including a one-year abatement of rent, most of which was to be passed along to oases tenants, and forgiving eight months of overdue repair fund payments.
But Wilton rejected the offer in November, documents show, and sought to extend its oases lease for 20 more years, which would require state legislation. Both sides used stern language in presenting their case to an independent mediator in March. There has been no resolution.
In the tollway’s letter, legal counsel Thomas Bamonte expressed surprise that Wilton had rejected the offer, particularly since the firm was facing “a possible day of reckoning with its bank as its loan comes due in August 2007.”
Bamonte lashed out at Wilton’s neglect of safety issues, contending that semi trucks could tip over because of potholes in parking lots and warning the “awful consequences of a catastrophic window break can only be imagined” from the firm’s failure to replace large windows overhanging the roadways.
But Scott Mayer, president of Wilton Partners, responded that the tollway was at fault for failing to clear highway debris on toll roads, particularly near construction sites, which “became missiles off of truck and automobile tires” and damaged the windows. Mayer also said the tollway didn’t give the firm a chance to make timely parking lot repairs.
Tenants seek relief
While Wilton was seeking changes to its contract terms, several oases tenants complained that Wilton refused to renegotiate their rents. One former tenant said he was paying more to Wilton for rent at the seven oases than Wilton was supposed to be paying the tollway in rent.
“Here I was paying my rent and operating costs every month, losing money all the way, asking [Wilton] for some kind of relief because the terms were so unfair,” said Eric D. Sigurdson, former president and co-owner of the Krispy Kreme franchise that left the oases. “Now, to find out they weren’t paying a dime in rent most of that time? That’s incredible.”
State Sen. Jeff Schoenberg (D-Evanston), who sponsored the original legislation to allow the tollway to enter into a 25-year lease with Wilton, said the tollway shouldn’t be giving “a rent subsidy” to Wilton when the firm “can’t pay the rent.”
McPartlin, the tollway’s executive director, said the problems with Wilton “don’t keep me awake at night” compared with concerns about ongoing road-construction projects.
“If they can’t make it, they can’t make it. That’s the reality,” McPartlin said of Wilton. “But the tollway still has benefited from this investment and we still have over-the-road oases that are truly a customer service for those who utilize the tollway, which I’m grateful for.”
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Trying to make developer ‘look better’
When the Tribune asked the Illinois State Toll Highway Authority about rent payments made by Wilton Partners for operating the seven tollway oases, agency officials alerted Wilton to the request.
The tollway suggested that Wilton would “look better” if it allowed the tollway to apply a construction security deposit to some of the unpaid rent it owed going back to mid-2006.
Here’s a timeline based on e-mail exchanges the Tribune obtained under the Freedom of Information Act.
Feb. 28, 2007: The Tribune requests Wilton Partners’ payments since Jan. 1, 2003.
March 8: In an e-mail, Tollway attorney Thomas Bamonte tells Wilton President Scott Mayer, “Give serious consideration to having the Tollway apply the security deposit to the rents currently owed.” Without mentioning the Tribune, Bamonte tells Wilton the tollway will delay providing the requested documents to the newspaper: “Per your phone call . . . the Tollway will be turning over the requested Wilton payment information on the due date, which is being extended to March 20. This is the final extension.”
March 12: Tollway official Matthew Beaudet informs the Tribune in writing, “The Tollway is still reviewing your Freedom of Information Act request” and will take seven more working days to respond–its right under the law.
March 13: With Wilton’s agreement, $400,000 from its security deposit is applied to pay some back rent.
March 20: The tollway provides the Tribune a document listing a series of monthly rental payments made by Wilton since January 2003. Included without explanation is a series of payments for back rent, all made on the same March 13 date.
June: Following another FOIA request and questions, tollway officials acknowledge the series of payments listed in March was a lump sum from the security deposit applied to the back rent.
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THE ILLINOIS TOLLWAY SAYS WILTON PARTNERS OWES:
$352,426 in base rent plus late fees to cover January through June of this year.
$532,000 in payments it is required to make into a special maintenance fund for oases repair and renovation.
$88,000 for parking lot repairs.
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