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Follow the Money: Who really bought the "Rezko lot"?

By bmerry on April 1, 2008 | From rezkowatch.blogspot.com

Following the October 2006 indictment of political fixer Antoin "Tony" Rezko, the Chicago Tribune's Ray Gibson and David Jackson reported that when Sen. Barack Obama (D-Ill.) bought his $1.65 million faux Georgian mansion in the Kenwood section of Hyde Park on June 15, 2005, Rezko and his wife, Rita Rezko, "wasted no time. The same day the Obamas closed on the house, the Rezkos closed on the purchase of the adjoining vacant lot, which once was the estate's lush side yard." The simultaneous real estate transactions have been the subject of much speculation—including in a number of articles posted by RezkoWatch—as to why it was Rita Rezko—and not her husband, real estate developer and Obama political patron, Tony Rezko—who purchased the garden lot adjacent to Sen. Obama's townhouse from Fredric Wondisford.

Truth be told, RezkoWatch was very close to the answer on March 23, 2008, in its article based on the new list of Rezko-related campaign contributions released on March 14, 2008, by Sen. Obama. One $2,000 donation by a Michael Sreenan was contributed to Obama's campaign on June 30, 2003, the same date that a growing list of Rezko-related contributors to Sen. Obama's campaign also made contributions.

In that article RezkoWatch identified Sreenan as a real estate attorney with Rezmar Inc., Tony Rezko's real estate development firm.

As reported by The Politico

[Obama's list didn’t] include five other contributions totaling $3,500.00 that were also made by Sreenan to Obama. All of his contributions were made on the same days other Rezko associates and employees contributed often matching sums, including Sreenan’s first contribution on record, a $1,000 check reported on the same March 2000 day that five other Rezko employees also plunked down $1,000 each. Obama did include the other five Rezko-linked contributions on the list of those contributed to charity.

Next, according to Cook County property records, the vacant lot purchased June 15, 2005, by Rita Rezko was sold on December 28, 2006, to 5050 S Greenwood LLC. In December 2007 the Hyde Park-Kenwood Community Conference (HPKCC) Preservation and Zoning Policy Committee reported that the lot had been "sold again by a lawyer connected to Rezko and will likely be developed into a number of condo units (6 were planned by Michael Sreenan)" who had "tripled" the asking price to $1.5 million "due to uniqueness of the site's being next to Obama's," among other concerns.

In December 2006, it was impossible for Sreenan to purchase the whole unimproved garden lot from Rita Rezko, as on January 11, 2006, she had sold to Sen. Obama a 10-foot strip of land adjacent to his townhouse property for $104,500.00. Sreenan purchased what equated to more or less 5/6 of the original lot.

As stated elsewhere in the HPKCC report, whoever bought the land would need city approval to build on it due to its location in the historic Kenwood district in Hyde Park. As recently as February 28, 2008, Tim Novak wrote in the Chicago Sun-Times that Sreenan said he had a "contingent contract" and three or four offers for the lot. Therefore, the likelihood that the lot would be approved by both the HPKCC and the city for development was remote. As RezkoWatch observed on March 23, 2008, Sen. Obama is "one lucky fellow."

Weeks earlier, on February 10, 2008, RezkoWatch posted a lengthy article in which was discussed the fact that Rita Rezko purchased the lot for the full asking price of $625,000.00, with a downpayment of $125,000.00 and the $500,000.00 balance financed with the Mutual Bank of Harvey, Illinois, which is owned by Amrish Mahajan, who had loaned millions of dollars in financing for Tony Rezko's real estate ventures.

It is also important to note that Sreenan, who handled the transaction for Rita Rezko, "said that the lot was attractive to developers and that the Rezkos had to outbid others to buy it."

Complicating the matter is the fact that the January 26, 2008, Motion for Issuance of an Arrest Warrant in United States of America v. Antoin Rezko showed that in November 2006 Tony Rezko had submitted documentation "detailing his assets and liabilities" to the Court. On November 2, 2006, Rezko's counsel sent a letter to the Court which stated "that it was 'abundantly clear' that [Rezko] 'has no income, negative cash flow, no liquid assets, no unemcumbered assets, is significantly in arrears on many of his obligations ... and has been forced to rely on family friends for financial assistance.'" Rita Rezko only "had a salary of $37,000, but no other significant assets."

In fact, on October 20, 2006, when Tony Rezko made his second court appearance following his indictment, it was reported that Rezko had "fallen tens of thousands of dollars behind in mortgage and property tax payments. The lender filed suit to take back the big place." Not only were the Rezkos broke, but Tony Rezko was about $50 million in debt.

As RezkoWatch wrote on February 10, 2008, this leads to the question of where Rita Rezko obtained the $125,000.00 downpayment to purchase the lot, as the source is not stated. Additionally, as this debt—the $125,000.00—is not listed among Rita Rezko's liabilities in October 2006, it suggests that the loan had been paid off.

On February 16, 2008, RezkoWatch took another look at the real estate transaction, once again coming close to an answer. The Rezko-Obama real estate case was put before a licensed realtor, who provided this observation:

On December 28, 2006, Sreenan assumed the position of Buyer #2, Rita Rezko. The relationship between the owners of the two adjoining properties changed, with the Obamas now not only controlling access to the lot but also controlling the access for a third buyer, someone who was not part of the original transaction. Additionally, there have been no reports that access from the street to the lot formerly owned by Rita Rezko has been accomplished.

This comment was very close to answering two important questions—where did Rita Rezko get the $125,000.00 downpayment for the lot? and who was the real purchaser?

Another appearance by Tony Rezko with his attorneys Joseph J. Duffy and William P. Ziegelmueller before U.S. District Court Judge Amy St. Eve on January 16, 2007, may hold the answers.

Within the transcript of the ex parte meeting regarding Tony Rezko's assets as a basis for Judge St. Eve to set Rezko's bond are a few sentences which would not have significance unless put into the proper perspective.

When asked about possible assets held by his wife, Tony Rezko responded that his wife (no name) had some some land in Hyde Park she had sold the month before. Rezko said she had sold it for $120,000 in excess of the mortgage (he didn't say value, he said in excess of the mortgage). However, Tony Rezko said that the $120,000 went to pay the buyer for a previous debt and that she had not made one penny on the deal.

As many have calculated that the $575,000.00 selling price would have left Rita Rezko with a small profit, this information changes the picture. The mortgage was for $500,000.00, indicating that $575,000.00 less the $120,000.00 left a mortgage balance of $450,000.00 to be paid off. But, the Rezkos were broke. Who had paid down the mortgage balance?

The buyer, of course, was Michael Sreenan, Tony Rezko's real estate attorney who had purchased the property as 5050 S Greenwood LLC. It would not require too far a leap of the imagination to assume that it was Sreenan who had provided Rita Rezko with a backdoor loan to make the downpayment on the lot in January 2005. It would not require too much of a leap to assume that it was also Sreenan who had made the mortgage payments between June 2005 and December 2006, as well.

What makes this particular transaction stand out, indicating Sreenan was the real buyer, is that the lot purchase was not typical of how Tony Rezko conducted his real estate transactions. We can take his word for that straight from this same court document. In fact, someone following along with his testimony in Judge St. Eve's chambers would have required advanced charting skills in trying to understand how Rezko constructed his business deals.

For example, while attempting to explain his connection with the 62-acre downtown Chicago riverside district development, Tony Rezko described layers of companies within companies: Riverside District Development was owned by Heritage District Partners, which was partly owned by MT Property Holdings, in which Rezko held 80% and Mike Rumman the other 20%, with Heritage itself owned 50% by Nadhmi Auchi's General Mediterranean Holding (GMH), making it a partner in the 62-acre development. In September 2005, Rezko said, the 62 acres were sold to GMH, which hired Heritage as the developer for 50% of the profit and monthly fees/expenses. GMH put forth $130 million to pay off debtors and investors at 12% per annum, with the first mortgage on the property being about $27 million. Additionally, Rezko said he had converted 2% of his ownership of MT Property Holdings to settle a debt. Regarding Rezko's real estate company, Rezmar Corp., it was explained that it was a fluid company, with transfers made to Canada but no "substantial amounts".

So, this begs the question why did Rita Rezko make this direct purchase of the lot adjacent to Sen. Obama's townhouse? If, as Sen. Obama told the editorial boards and reporters for Chicago's two major newspapers, Tony Rezko suggested to him that this would be a good investment property, why did Tony Rezko not purchase it and handle it like he did any of his other investment properties. Why was it that Rita Rezko made the purchase? And, if this was intended as a future investment property, why would Rita Rezko agree to sell off 1/6 of the whole, thereby reducing the value for future development?

Once again the January 16, 2007, ex parte transcript provides an answer. Judge St. Eve asked Rezko when he knew that he was under federal investigation. Rezko hedged and said that he had never been officially told, then said one or two years ago. The Judge next asked him when he had hired Joseph J. Duffy, his attorney, and Rezko said in 2004 because he found out the Feds were looking.

The clear implication here is that Rezko wanted to assist his friend, Sen. Obama, in purchasing his Hyde Park mansion. Rezko has not been called the "real estate fairy" for nothing. However, in December 2004 when Sen. Obama approached him for his opinion—and possibly his help—in buying the townhouse lot, knowing that he and his real estate development and other business transactions were being scrutinized by the Feds, Rezko came up with a plan.

In order for Sen. Obama to purchase the townhouse under the terms dictated by the seller, Fredric Wondisford, that both the townhouse lot and the unimproved adjacent lot had to close on the same day in June 2005, the lot would be purchased by his wife, Rita Rezko; his real estate attorney, Michael Sreenan, would advance the $125,000.00 downpayment; and his friend and long-term banker, Amrish Mahajan of the Mutual Bank of Harvey, Illinois, would finance the $500,000.00 mortgage. As we said earlier, Sen. Obama is "one lucky fellow".

Elsewhere in the discussion Tony Rezko explained that real estate and development transactions were conducted through his companies. Often, those transactions were put in trust, as can be verified in Cook County property records. In fact, going back over property transaction records for both Tony Rezko and Rita Rezko, the use of trusts comes up often.

So, the many odd, non-conforming transactions lead to more questions. Did Tony Rezko advise Sen. Obama to place his real estate holdings, the townhouse lot purchased in June 2005 and 10-foot strip acquired in January 2006, into a trust. Why? Who is making the payments to Sen. Obama's trust? Who holds the deed? Where did Sen. Obama get the $300,000.00+ downpayment for the townhouse lot in January 2005? Did Tony Rezko come up with a plan similar to the one he devised for the purchase of the "Rezko lot"? Why all the secrecy?