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THE WATCHDOGS: Quinn gave $10 million to film studio to buy land that’s not for sale

Days after Pat Quinn lost the November election, Chicago’s busiest film studio asked the lame-duck governor for a hefty state grant to buy industrial land around its West Side campus, where “Chicago Fire” and other TV shows and movies are produced.

Three weeks before Quinn left office, Cinespace Chicago Film Studios got a $10 million check from the cash-strapped state of Illinois.

RELATED: THE WATCHDOGS: Rauner orders movie studio to return $10M grant for land that’s not for sale

The check’s been cashed. But the studio has yet to buy any land, and the owners of six properties listed in the studio’s grant application say they have no plans to sell to Cinespace or anyone else. Nor does a seventh property appear to be for sale, according to a Chicago Sun-Times investigation that also found:

• Quinn’s administration gave Cinespace the $10 million without any appraisals to justify the projected purchase prices listed by the studio’s owners.

• The former governor’s Department of Commerce and Economic Opportunity had nothing to show that Cinespace had pending contracts to buy any of the properties or had been in negotiations to buy them.

• The state agency gave Cinespace the ability to buy just about any land it wants, allowing it to “substitute properties . . . in the event the applicant is unable to successfully negotiate the purchase of the listed properties.” Cinespace would need the state’s permission to do so. It has not asked for that.

• The grant went out even though the studio’s owners had trouble complying with reporting requirements on another grant the studio had gotten under Quinn. In 2012,  the state sent Cinespace four “not in compliance” letters. The state then suspended the $1.3 million construction grant because the studio hadn’t turned in “project status reports” on time — an issue that wasn’t resolved until March 2014, records show. Even as the Quinn administration was sending those letters, the state gave the studio three other grants totaling $16 million.

Cinespace check

Altogether, Cinespace has gotten five state grants totaling $27.3 million — all while Quinn was governor.

Quinn couldn’t be reached for comment.

A source from his administration says there was nothing improper with the most recent grant, one of Quinn’s last acts before leaving office.

The former aide, speaking only on the condition of anonymity, notes that the $10 million grant expires on June 30 and that Cinespace would have to repay any of the money it hasn’t spent.

The aide says it’s common practice for the state to write lump-sum grant checks to businesses like Cinespace that bring jobs to Illinois — particularly when the grants involve buying land.

“To get these deals done, you have to have liquidity,” the aide says. “There was quite a bit of due diligence and discussion, which is totally in keeping with these types of grants.”

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Gov. Bruce Rauner’s administration won’t talk about the film studio grant. But if Quinn didn’t award the grant, the studio might not have gotten the $10 million at all because of an executive order Rauner signed banning non-essential state spending once he took office.

Under the grant, Cinespace is required to put in twice as much of its own money as it spends from the state grant. That’s to go toward land acquisition and rehabilitation, as well as free rent for college film programs, including those at DePaul University and Columbia College Chicago.

Cinespace is a family-owned business run by former real estate developer Alex Pissios. It has used the millions of dollars it’s gotten from the state to turn what once was a Ryerson steel mill in North Lawndale into what the company touts as the biggest film studio east of Los Angeles.

Alex Pissios. | Sun-Times files

Alex Pissios | Sun-Times files

It has deposited millions of dollars from the state grants with Chicago’s Belmont Bank & Trust, a small, neighborhood bank with powerful political connections that has given the studio millions of dollars in loans.

The bank’s president, attorney James J. Banks, has helped numerous real estate clients win zoning changes at City Hall, where his uncle, former Ald. William J.P. Banks (36th), was chairman of the City Council’s zoning committee. For more than two decades, James Banks has been on the Illinois Tollway board and was reappointed by Quinn. The bank’s board also includes former state Sen. James DeLeo, D-Chicago, and businessman Fred B. Barbara, a friend of former Mayor Richard M. Daley who struck it rich hauling garbage for City Hall.

James J. Banks at City Hall last year. |  Sun-Times files

James J. Banks at City Hall last year. | Sun-Times files

Pissios didn’t return messages seeking comment.

In January, the Sun-Times reported that, even as Mayor Rahm Emanuel’s administration was negotiating to give Cinespace a property tax break, Pissios had rolled up $250,000 in debts with City Hall for unpaid taxes and building code violations unrelated to the studio. Pissios has since paid off the debt. Cinespace has yet to use the tax break.

Cinespace told state officials it wanted the latest state grant to satisfy “the increased demand for educational space, job-training facilities and increased operational space for support businesses which participate in the Illinois television and film industry.”

Cinespace applied for the grant on Nov. 13 — nine days after Quinn lost to Rauner.

The studio initially asked for $15 million to buy eight properties but, a day later, cut its application to $10 million for the seven properties.

The Quinn administration approved the grant on Dec. 1 and issued the $10 million check on Dec. 19. Cinespace cashed it at MB Financial Bank by the end of the year.

According to the grant application, the studio was targeting these properties for possible purchase:

• 1414 S. Western Ave. — a multilevel industrial building with a leaky roof, broken windows and delivery dock that floods, according to an earlier appraisal, filed with Cook County in 2012. In mid-December, a company owned by car dealer Joseph Perillo bought the property for $1.9 million.

Cinespace told state officials it hoped to buy the property by March 31 for $3.7 million — including $3.6 million from the state grant. Perillo says he has never spoken with anyone from Cinespace about selling the property and has no plans to sell it.

• 2643 W. 19th St. — a dilapidated warehouse that a company called B&J Wire sold for $601,000 on Jan. 30 to Vinod Patel, whose sons plan to convert it into an industrial laundry business serving downtown hotels. Cinespace told the state it was aiming to buy the site by June 30 for $650,000  — $500,000 of that out of the state money.

“We’re not planning on selling,” says Nayan Patel, one of Vinod Patel’s sons. “We just closed on the property in January.”

• 1450 S. Western Ave. — a vacant lot Cinespace said it planned to acquire by Dec. 31 for $1.65 million, including $500,000 from the state money. The property has been in the same family since the late 1980s. Its owners couldn’t be reached for comment.

• 1534 S. Western Ave., 1700 S. Western Ave., 2443 W. 16th St. and 2444 W. 16th St. — all owned by a company called 1600 Western Venture. Cinespace told the state it intended to pay $12.9 million for the four properties — including $5.4 million from the state grant — between March 31 and June 30.

Brian Flisk, who is listed in state records as a manager of 1600 Western Venture, says Cinespace has asked about the buildings and land. But Flisk says: “We’re not interested in selling. The state may have given them the money, but we have no contract to sell it to anybody.”

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