Ex-Mayor Richard M. Daley, son bankrolling lender profiting off Cook County land deals
They’re investors in a firm cashing in on the Cook County Land Bank Authority, financing rehabbers who flip properties for double, triple, even 50 times what they paid the county.
Former Mayor Richard M. Daley and his son Patrick Daley are among the financial backers of a venture that’s cashing in by financing rehabbers who buy homes from the Cook County Land Bank Authority and flip them for double, triple, even 50 times the amount they paid the county months earlier.
The company, Renovo Financial, has financed 75 purchases over the past five years of homes that were then refurbished and sold. Sixty-five of the properties financed by Renovo have been resold at a median of $145,341 over what the rehabbers paid the land bank, records obtained by the Chicago Sun-Times show.
How much of that was profit would depend on the size of the investment Renovo’s rehabbers make in rehabilitating the properties — information they aren’t required to disclose to the county.
Renovo won’t discuss the amount or terms of the investment by the Daleys, who didn’t respond to messages seeking comment.
The Cook County Land Bank Authority aims to turn around vacant properties in economically distressed areas mainly on the South Side and the West Side. It obtains the properties and sells them, sometimes at a loss, to people and businesses that rehabilitate the homes, erasing eyesores and bringing back taxpaying owners.
The agency is the subject of two ongoing county reviews as a result of Sun-Times reports last year. Cook County Board President Toni Preckwinkle ordered an audit of the agency after the newspaper reported last fall that the land bank accepted the donation of a dilapidated building owned by Chester Wilson, chief of staff to Ald. Carrie Austin (34th), wiped out more than $200,000 that Wilson owed in back property taxes, then sold the building to Wilson’s business partner. The agency also is under investigation by Cook County Inspector General Patrick Blanchard over the deal.
Also, Robert Rose, executive director of the land bank, fired his aide Natasha Cornog in February after the Sun-Times reported she got more than $16,000 in property tax breaks by improperly taking homestead exemptions on three homes — only one is allowed — including an Oak Lawn house she bought from the land bank.
Renovo has made $11.5 million in loans to rehabbers who bought 75 homes from the land bank, documents from the land bank and other county agencies show.
Created in 2013, the land bank was granted extraordinary powers to help revive economically distressed communities pocked with vacant and abandoned homes. It seizes tax-delinquent properties, buys foreclosed homes at steep discounts, erases any unpaid property taxes, then sells the properties cheap to rehabbers to improve them. The land bank says it has sold more than 900 properties, returning about $9 million to the county’s tax rolls.
The agency generally focuses on downtrodden neighborhoods.
But the foreclosed homes that Renovo’s rehabbers obtained from the land bank and flipped were in thriving communities in the city and in suburbs including Niles, Brookfield, Homewood and Flossmoor. Nearly all of those homes had been foreclosed by Fannie Mae, the federally backed mortgage-finance firm, and then sold to the land bank.
Of the 75 properties Renovo-financed rehabbers have bought from the land bank, 65 have been rehabbed and flipped to new owners.
Two of the properties are being leased to tenants supported by government-subsidized housing vouchers from the Chicago Housing Authority.
The land bank lost money on seven of the homes involved in the Renovo deals — six in Chicago and one in Berwyn — because the agency sold them at a loss to the company’s rehabbers. Once they finished work on the homes, they sold them for as much as 30 times what they paid the land bank for them, records show.
Cook County Commissioner Bridget Gainer, who created the land bank and chairs its board, says the agency doesn’t steer rehabbers to Renovo.
“We don’t refer — ever,” Gainer says. “When we put a house up and somebody wants to buy it, they have to show they have the money, just like getting a mortgage.”
Renovo began operating in 2011, two years before the land bank was created, funded by private investment firms.
Last year, Kevin Werner, the company’s chief executive officer, said he’d lined up additional investors — including TUR Partners, an investment company Daley and his son formed after he retired as mayor in 2011.
While Daley was in office, his son was involved in a deal that became the subject of a federal investigation. The president of a sewer inspection company went to prison over his failure to disclose to City Hall that Daley’s son and nephew Robert Vanecko held secret ownership stakes in the company when it was given lucrative contract extensions by the Daley administration.
And a venture capital firm that bankrolled the sewer company had paid Daley’s son more than $1.2 million between 2002 and 2009, $708,999 of that for his role in securing investors for a company that got a city contract from the Daley administration to install wireless Internet service at O’Hare Airport and Midway Airport.
Werner won’t say how much the Daleys have invested in Renovo, discuss the terms or comment on any of his investors.
Most of Renovo’s deals involving the land bank were made before the Daleys invested.
Renovo’s recent investors include Andy Gloor, chief executive officer of the Chicago development company Sterling Bay, which built and owns the McDonald’s corporate headquarters in the West Loop. Sterling Bay drew the wrath of Mayor Lori Lightfoot when she was running for office last year over the $1.3 billion subsidy it got from City Hall for its massive planned Lincoln Yards project along the Chicago River on the North Side.
The other recent investors in Renovo also include real estate magnate Sean Conlon, who is a business partner of Patrick Daley and the host of “The Deed,” a CNBC television show about flipping homes.
Conlon created Conlon-Renovo Investors, LLC, a Delaware company that planned to raise $1.6 million, according to a document he filed with the U.S. Securities and Exchange Commission on May 30, 2019.
Conlon won’t say how much he and the others invested in Werner’s company, which has financed some of the real estate deals featured on Conlon’s TV show.
“Details are private,” Conlon says via text message in response to questions. “We just recently invested. I have known Kevin for 20 years and find him honest and very hardworking. And very importantly he works with all his borrowers in times of trouble. I respect that. We invested for him to build out his infrastructure and grow his company and to be liquid should a slowdown come.”
Conlon says he has had no direct business relationship with the land bank.
Among the rehabbers Renovo has lent money to, three had gone bankrupt before getting loans from Werner’s company, records show.
Werner says he met Gainer during the time she was thinking about creating the land bank. He says his company is a “natural fit” with the county agency.
“Renovo is the largest lender in Chicago to rehabbers,” he says. “We have no official tie to the land bank except we view them as a strategic partner active along the same mission: We have to get properties renovated, help improve neighborhoods around Chicago. We work with them to collaborate around the best ways to get property into people’s hands and help turn it around and rehab it.”
Renovo’s construction loans for these rehab projects often are for terms of no longer than a year — long enough, Werner says, to “buy the house and fix it up and either sell it or refinance it with a more permanent lender for the long term.”
Based on the records the Sun-Times examined, here’s a look at some of the deals Renovo has financed involving the land bank:
- It’s done 10 of the deals with Nicole Harper, a former accountant for the Cook County Health and Hospitals System. Harper — who went bankrupt more than a decade ago — bought homes using five companies, each with a different partner.
On its website, Renovo touts her success, describing her as a “college-educated professional with desires of earning more than her day job can pay for.”
The land bank bought a ranch house in Niles for $149,474 from Fannie Mae and sold it to Harper — who got a $199,000 loan from Renovo — for $152,974. About five months later, she sold the property for $419,000. In one of her other deals with the land bank, she bought a home in Brookfield for $155,953, got a $336,000 loan from Renovo and resold the house for $529,000.
- Evolution Properties LLC, a Lake in the Hills developer, has tapped Renovo to finance 11 of the 25 properties it bought from the land bank. The land bank sold two of those homes each at a $29,000 loss. The developer bought one of them for $100,000 and sold it for $200,000 and paid $65,720 for the other and sold it for $245,000.
- Mike Tassone of Naperville, the owner of DNV Solutions and DNV Properties, used Renovo to finance four land bank properties in Chicago in 2018. Tassone turned to Renovo after federal regulators shut down his previous lender, Washington Federal Bank for Savings, over a massive fraud scheme weeks after the bank’s president John Gembara was found hanged in a customer’s Park Ridge home. Tassone had declared bankruptcy in 2012.
- Two multi-unit buildings that Renovo financed didn’t get flipped right away. Instead, they became Section 8 rentals. Plan Real Estate bought one of them, on the city’s Northwest Side in Avondale, from the land bank for $147,346 — $3,500 more than it cost the county agency. It sold the building last month for $625,000.