The Biography of Chicago’s Marina City
Paying for Marina City
June 22, 1960
The price tag for Marina City reads $36 million – $23 million for the residential phase and the rest for the commercial phase.
George H. Dovenmuehle, chairman of Dovenmuehle Inc., a large mortgage-banking firm in Chicago, has expressed interest in financing the residential phase. Dovenmuehle and Continental Illinois National Bank would issue a mortgage loan of $17,819,100 with a term of 39 years and maximum interest rate of 5.25 percent.
The loan amount represented 49 percent of the total cost of $36 million. A separate loan of $5 million would be obtained to build the office building. Another $13,180,900 would come from private investors. These included the Building Service Employees International Union, Chicago Local 1, Local 32B in New York, and the union’s pension trust, which had headquarters on the west coast.
The mortgage insurance, payable in case of default, came from the Federal Housing Administration.
The amount initially approved by the FHA was the most it could commit to – a limit that was intended for two or three-apartment buildings – but it was still about $1 million short of what was needed for the 896-apartment Marina City.
Both Charles R. Swibel and Marina City’s architect, Bertrand Goldberg, went to work on the FHA.
Swibel, meanwhile, was handling most of the negotiations with the FHA. He convinced Mayor Richard J. Daley to speak with U. S. Representative Daniel Rostenkowski (Democrat, Illinois), who then put Swibel in touch with the FHA.
According to his son, Howard, it was Charles Swibel who convinced the FHA to increase its mortgage insurance limit, not Goldberg.
In a letter dated June 22, 1960, Waner told Marina City Building Corporation president William L. McFetridge the FHA had completed its preliminary analysis of the proposed project “and will be glad to entertain a formal application.”
After a review by the Central Office, Waner assured McFetridge that “a commitment shall be forthcoming.”
(Above) Bertrand Goldberg speaks at a pre-construction event in 1960 at the Astor Hotel in New York. At left are David Sullivan, president of Building Service Employees International Union from 1960 to 1971, labor union attorney Lester Asher, and William McFetridge. Photo by Merkle Press Inc.
A government guarantee of the mortgage was necessary because the equity the union pension fund had in the project was relatively low. This limited equity would come back to haunt the union. Marina City arguably was not a successful investment.
“It was a disaster,” said Howard in 2008. “Because the equity was so thin and there was so much borrowing, plus there were cost over-runs.”
On July 7, 1960, as test borings for the foundation were being made, the FHA issued its largest commitment yet of $17,819,100 to BSEIU.
“So, with an FHA guarantee,” Howard explains, “you can go to a bank and the bankers are not going to be at risk – you got a down payment and then you’ve got this FHA guaranteed loan.”
The down payment on the mortgage could have been as low as five percent.
By obtaining from private investors the $17,819,100 mortgage for the residential property, the project saved $800,000, according to Charles Swibel, himself a mortgage banker. This is because of a commitment by 19 financial institutions in the eastern United States – a group led by Institutional Securities Corporation – to purchase the mortgage. They were originally to get a seven percent discount but because of the private investment this was lowered to three percent.
Financing was not complete until September 1, 1961, when it was announced that Continental Illinois National Bank and Trust Company would loan the project $5 million toward the $10 million office building. Construction of the office building would start the next month.
Two-thirds of Marina City’s income would go to pay back investors. The rest would have to cover operating expenses. This was not going to end well.
| Updated 15-Jun-14 |