Tuesday, October 30, 2007

Sweet Deals, Chicago Style

I wish I had somebody like Bridgeport developers Thomas DiPiazza and Richard Ferro to advise me on real estate matters. Then again, maybe I need the person who advises them.

DiPiazza and Ferro are the guys who paid $50,000 for a heavily polluted, essentially vacant parcel of land along the Chicago River in 1998 -- at almost exactly the same time that somebody at City Hall came to the conclusion the site would make a swell location for a city park.

Immediately thereafter, the city began taking steps to acquire the property, never quite getting the job done until six years later, when it paid the two men $1.2 million to take this same heavily polluted, vacant parcel off their hands.

I don't know about you, but I never do as well with my real estate investments.
The Popcorn Factory Discount Specials
My wife and I always joke that we buy high and sell low, which isn't entirely true, but our timing does tend to be a little off. We'll see an opportunity, but we don't take the chance until the price is out of reach, or we'll sell a house just before the market shoots sky high.

That's why I'm in awe of guys like DiPiazza and Ferro, who could do their own infomercials if they weren't camera shy, as Bridgeport businessmen tend to be.
Insider deal?

DiPiazza is definitely an interesting character. He used to be a city sewer department worker before he got in a jam in the late 1980s for being at the racetrack on city time. He seems to have quite an interest in racehorses. Until just a few years ago, he owned a horse named Medlin Road in partnership with Nick "The Stick" LoCoco, the mob bookie who ran the city's Hired Truck program in the Department of Transportation before he was charged in the federal probe.

As most of you recall, LoCoco never stood trial because he tragically died in December 2004 when, as fate would have it, he fell off a horse in what authorities said was a riding accident.

DiPiazza and Ferro may have known a little bit about the Hired Truck program themselves, as some of the trucking companies in the program rented space from them to park their trucks. But mostly, they have proved their expertise in real estate, becoming prominent players in Bridgeport during Mayor Daley's nearly two decades in office.

Their influence was perhaps not widely known, however, until another developer, Thomas Snitzer, filed a lawsuit earlier this year alleging that Tim Degnan, Daley's former patronage chief and longtime friend, tried to force Snitzer to take on his pal DiPiazza as a partner -- as the price of doing business in Bridgeport. Instead, Snitzer gave DiPiazza a $1.3 million consulting contract.

It was in that same suit that Snitzer alleged DiPiazza was acting on inside information in 1998 when he and Ferro bought the land at the mouth of Bubbly Creek, which the city later purchased from them. Coincidence?

City officials scoff at the suggestion of insider dealings, noting that the decision to locate a park at the site -- actually an expansion of the new Canal Origins Park on the other side of Bubbly Creek -- grew out of a public planning process for the Chicago River undertaken in late 1997 and published in April 1998.

I don't see the one ruling out the other, and if I had subpoena power, I'd want to call in some people to answer questions.

One of the things to focus on is how the city decided to pay so much for a property for which it originally received an appraisal of $220,000 in 1998.

Even four years later, city planning officials thought they would obtain the land at the relative bargain of $520,000 because of the pollution problems.

As Planning's Kathleen Dickhut wrote in a Dec. 12, 2002, letter to the state Department of Natural Resources (which committed $385,900 to the project):

"Due to the condition of the property, we are optimistic that the owners will be willing to sell the property without the need for condemnation. A private entity purchasing the property will not have the advantage of working with Peoples Gas on the cleanup and therefore not likely be in a position to offer the owners fair market value for their properties."

Instead, the city arranged to force Peoples Gas to clean up the site, then paid DiPiazza and Ferro a higher value of $1.2 million as if the land was already suitable for residential development.

If they do get DiPiazza under oath, I wonder if the feds could ask him a question for me: What does he think about real estate values in the U.P.? Or would that be outside his area of expertise?

Thanks to Mark Brown

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