January 22, 2022
Local News

Tech company backs out of attempt to buy former Harvard Motorola campus

Tech company backs out of bid for former Harvard Motorola campus

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A Canadian business tycoon accused of orchestrating a transnational Ponzi scheme pushed away a potential business deal that Harvard city officials said would have brought hundreds of high-tech jobs to the long-vacant Motorola campus in Harvard.

The 1.5 million-square-foot building at 2001 N. Division St. might have once again housed a tech operation if all went well with an interested Ohio-based company, but pushback from the current owner and uncertainty surrounding his prosecution in Canada continue to stave off potential buyers, said Charlie Eldredge, executive director of Harvard Economic Development Corp.

Local taxing entities also continue to lose out on crucial property tax dollars, and local officials said they worry about the property deteriorating beyond repair if maintenance isn’t performed on the building soon.

“It has been a potentially enormous resource in the county,” Eldredge said. “If it were used for something productive, there’d be lots of jobs and a benefit probably not just for Harvard but for a pretty wide circle around Harvard.”

To sort out the matter, Harvard officials have filed for standing in the Canadian prosecution of Xiao Hua "Edward" Gong, a politically connected businessman who is accused of fraudulently selling securities worth hundreds of millions of dollars to citizens for two companies, 024 Pharma Inc. and Canada National TV Inc.

The scheme reached the U.S., China, Canada and New Zealand, court records show. Gong, who has donated about $7,000 to the Liberal Party of Canada, has been photographed alongside Canadian Prime Minister Justin Trudeau at a Liberal fundraiser in 2016, The Globe and Mail reported.

A restraining order on three of Gong's U.S. properties, including the one in Harvard, protects the assets should they be subject to forfeiture. That means Gong can't sell or give away the property without written approval from the Ontario attorney general and must keep the properties in good condition, according to the order.

If the attorney general approves a sale, the department would hold the payment “until further order,” according to court documents. Harvard officials were unsuccessful in their first request for the Canadian government to lift the order but are considering other avenues to salvage the property, Mayor Michael Kelly said.

“A lot of that is just unknown,” Kelly said. “We just don’t know what will happen.”

Ohio-based digital signage company Stratacache originally tried to purchase the Harvard property through a tax auction in 2016 but lost to Gong, company CEO Chris Riegel said.

“In 2018, when Mr. Gong was indicted, we reached out to Canadian authorities to try to purchase the building,” Riegel said. “We made three offers on it to Mr. Gong without a single response.”

However, Mahmoud Faisal Elkhatib, one of Gong’s attorneys, tells a different story. He asked one of Stratacache’s acquisition companies – Amadeus – to take part in the bidding process, Elkhatib said.

“I advised them to submit offers as part of this recent bidding process, and they refused,” Elkhatib said.

Riegel called the claim “100% objectively false.”

The CEO said he had hoped to turn the Harvard property into a manufacturing facility for Stratacache, which produces digital signs, augmented and virtual reality products and artificial intelligence, according to its website.

The building would have been easy to modify to suit Stratacache’s needs, and Harvard’s proximity to Chicago meant better access to potential skilled employees from the city, Riegel said.

The company backed out of its renewed attempt to purchase the site’s outstanding property taxes in mid-July, instead purchasing earlier this year the site of a 200-acre former Oregon computer chip factory, Riegel said.

“There seems to be no intent to actually sell or transact,” Riegel said.

During a June 24 hearing in McHenry County court, Elkhatib said Gong was in the process of selling the property to a separate interested buyer, but city officials are skeptical.

“Now it looks like he is saying through his attorney that he has a buyer,” Eldredge said. “There’s a good deal of doubt as to whether that is true or the ‘buyer’ actually has the funds to purchase the building or would do anything if he did.”

Gong has had “significant interest and numerous bids and bidders to purchase the facility,” Elkhatib said. Under the authority of both the Canadian and U.S. governments, Gong and his team are approaching the final stages of the bidding process, he said.

“We were very close to finalizing the bidding process and then received additional bids and offers. Final sale approval will come from the Canadian authorities,” Elkhatib said. “We can disclose that the strongest bidders have been end-user buyers looking to occupy the facility for their own utilization. The property speculators and flippers have not been competitive.”

Elkhatib did not disclose who the bidders are or what they intend to do with the property.

The Canadian prosecutor’s office declined to comment on the case.

Gong bought the Harvard property in April 2016 at an online auction for $9.3 million, the same amount Stratacache said it initially offered for the site.

“This is the worst kind of commercial real estate market in the last 50 years, and this guy has an opinion that the building is infinitely valuable, but it’s falling apart,” Riegel said.

An October 2019 injunction ordered by a McHenry County judge bars any further occupancy of the building until it is in full compliance with the city’s municipal code. Gong hasn’t kept up with the building’s maintenance, local officials said. The space has been vacant since 2003, when the highly anticipated but ultimately misfired Motorola plant closed its doors.

The repairs necessary to make the building safe would cost about $46 million, said Riegel, who previously had the property appraised.

Although Elkhatib admitted the campus needs “TLC” along with software and maintenance updates, he described the building as a “solid, nearly indestructible facility.”

“Even with all the work needed, the facility is an amazing bargain,” Elkhatib said. “In the hands of the right end-user buyer, this facility will flourish and potentially bring thousands of jobs to the facility.”

As it stands now, the building has mold, roof leaks, buckling floors, water damage and a failed 22,000-head sprinkler system, court records show.

After years of trying to purchase the campus, Stratacache cut its losses earlier this month. In March, the company bought the site of a 200-acre former Oregon computer chip factory at an auction for $6.3 million, Riegel said.

The operation, originally planned for Harvard, would have brought with it 300 to 400 jobs within the next 12 to 18 months, the CEO said. Riegel previously spoke with McHenry County College about a possible partnership to help train future local employees, he said.

“That all could have happened in Harvard,” Riegel said.

When Gong originally purchased the Harvard property, he announced plans to develop a smartphone manufacturing plant in March 2017. He was arrested in Canada on fraud charges the following December and allowed property taxes on the campus to go delinquent in September 2017. Although he redeemed them later in the year, the taxes went delinquent again and remain unpaid.

The taxes on the 325-acre Motorola campus were set to go to auction in McHenry County again in 2018 but were flagged because of a restraining order filed by the Department of Justice.

The order, filed on behalf of the Ontario Superior Court of Justice, also applies to Gong’s luxury hotel and convention center in Dearborn, Michigan, and the Pittsfield Hotel and Apartments in the Chicago Loop.

The Illinois Attorney General’s Office could not be reached for comment about the Chicago property.

Meanwhile, taxes for the former Motorola campus, the largest taxpayer within the city of Harvard and Harvard School District 50, have not been paid since 2017, property records show. District 50 and the city stand to collect the most from the former campus’ property taxes.

Over the years, the school district has missed out on about $9.7 million in unpaid taxes, Superintendent Corey Tafoya said.

“That $9.7 million could do incredible good in our facilities,” he said.

The lost tax revenue has most noticeably put a dent in District 50's progress on several building updates, Tafoya said. Ideally, Tafoya would like to see the district's buildings grow in step with its enrollment and include more modern updates, he said.

Although District 50 isn’t a party to any of the ongoing litigation, Tafoya has been outspoken in his support to have the former Motorola campus put to use.

“It’s discouraging to know that there’s potentially someone who wants to do something there, and for whatever reason they’re not allowed to,” Tafoya said.