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ONE WINNETKA
LINCOLN & HH

July 29, 2019

Mr. Peter Friedman

Holland & Knight, Partner
150 N. Riverside Plaza, Suite 2700
Chicago, ll60606

Re: SB Winnetka, LLC' s (the "Developer'' ) development of those certain parcels of real property located
on or about the corners of Lincoln and Elm Streets in downtown Winnetka. Illinois (the "Property" )
pursuant to that certain Amended and Restated Development Agreement dated October 16, 2018 (the
"Agreement").

Via Email: peter.friedman@hklaw.com

Dear Peter:

As requested, this letter shall serve as notice to your client, the Village of Winnetka, that the Developer,
and its attorney of some of their affiliates would like the opportunity to make a presentation to Village
Board as their next scheduled Board meeting on August 6, 2019 . This letter shall serve as a follow up to
your letter dated June 20, 2019 referencing the building conditions at the Property and your subsequent
letter dated July 2, 2019 identifying certain items of default from Sections 10.K and 7.B/13.B of the
Agreement. Please be advised that as oftoday' s date, the Developer has in fact made substantial progress
to alleviate and remedy all code violations on the Property which should be achieved in the next few
weeks. Rest assured there are no dangerous and hazardous conditions on or affecting any of the Property.
As such, we respectfully seek permission to provide evidence of compliance at the August 61h Village Board
meeting.

Regarding the allegations of default under the Agreement, as we have communicated in the past, there
were protracted and extensive negotiations required to formalize the 61h contract amendment/extension
with the owner's of Canney' s Pharmacy . These negotiations took far longer than we reasonably
anticipated for a wide variety of rea sons beyond our control. I am happy to report than on July 9th, our
lender, Romspen Investment Corporation (the project lender), agreed to the number of changes that the
owner of Canney's required to be added to the 61h Amendment to the contract (the "Canney's Contract" ).
Our lender has been patient and diligent, assisting in these negotiations since January 2019 and we expect
to close on the financing of this transaction by August 2"d (see attached Contract exhibit). One substantive
change to the Canney's Contract was that the legal conveyance of the Canney's real property will now

Agenda Packet P. 95
only occur after the buildout of their new pharmacy (across the street) is completed. This new concept
was not anticipated nor was it in prior iterations of the purchase and sale agreement previously negotiated
by Canney's, and therefore additional time will be required to convey fee simple title to the Canney's real
property.

Regrettably, none of this was contemplated when the Agreement was finalized because at that time, the
Canney's owner had agreed to sell their real property and remain in their existing space while the build
out was completed. This new deal term was the sole reason why the Developer could not effectuate
recordation of the Plat as contemplated under the Agreement. It will take approximately 9 additional
weeks to complete the construction buildout of the new Canney's pharmacy, and when a Certificate of
Occupancy is received from the Village of Winnetka, pursuant to the Canney's Contract, fee simple title
can then be conveyed and the Plat can be recorded, thus making the zoning entitlements gained from the
Agreement effective. Please note, that the costs for the Canney's buildout plus the costs to close on the
acquisition of the Canney's Contract will be funded by our lender and held in escrow by the title company.
We expect that funding to be in place and in escrow later this week. Given that the Village Board will be
presented with a resolution to terminate the Agreement and the accompanying zoning at the next Village
Board meeting on August 6th, we respectfully seek to address the Village Board to provide an explanation
and the evidence and assurances of the Developers ability to comply with the Agreement and therefore
defer the proposed resolution or as a reason for not voting in favor of the resolution to terminate the
Agreement.

In summary with detailed evidence to follow in the upcoming days:

1. Upon closing the loan provided by Romspen Investment Company, we will provide evidence of the
funded construction buildout escrow and the funded balance to close the Canney's property transaction.
Also, we will provide evidence that all outstanding real estate taxes have been paid . We expect work will
begin on the Pharmacy construction by August 2151, 2019. See attached Loan Commitment.

2. The buildings at Property will have been brought into code compliance with safe, non-dangerous and
hazardous-free conditions.

3. While out of my control, it is our hope to have Marc Jacobs from Canney's present at the Village Board
meeting to express his sincere desire for the proposed development to move forward and to verify that
we are in fact under the Canney's Contract. It is our hope that he will confirm that he is enthusiastically
moving forward with the transaction.

4. Our new project sponsor(s) and partner(s), will accompany me to the meeting and will provide sealed
financial statements in advance of the August 6th meeting indicating their financial wherewithal to comply
with Exhibit Q of the Agreement. I will also be prepared to answer any questions about the construction
financing.

5. Adjustments to the original plan, while not our intention from the onset, are inevitable given the
changes in the global landscape in the Chicago area, Cook County and the State of Illinois. The uncertainty
surrounding the ultimate value of assets in Illinois due to "wealth flight" brought on by proposed increase
in real estate and income taxes are negative; and especially relevant in an affluent area such as Winnetka
and greatly compound the issue. A recent CBRE report suggests that the proposed Cook County real estate
tax increase will reduce the residual value of commercial real estate in Cook County by One Trillion dollars.
With that in mind, we are not sure whether the Village Council will consider the proposed changes to the
planned development minor or "substantial", but we are prepared to move forward with the
development in substantial compliance with the approved Development Agreement and plans.

Agenda Packet P. 96
The suggested plans are in compliance with the agreed to public benefits consisting of 131 village owned
parking spaces and requisite landscaping per the Agreement.

Adjustments to the approved plan are as follows :

1) an increase of the proposed unit count from the stated 58-62 units per the Agreement to
up to 80 units. Net "livable" area will not be affected, nor will the envelope of the building design
materially change.
2) a reconfiguration of the underground parking: eliminating the lower second level while
still providing the agreed to "Public Benefit" of 131 parking stalls, and
3) the elimination of balconies favor of Juliet openings. However, the set-back terraces on
floor 5, will remain per the design.

In addition to the above, I would like to take the opportunity to explain to the Village Board why revocation
of the Agreement and termination of the Property's current zoning is not in the best interests of the
constituents of Winnetka nor is the best path to getting the Property developed. Should the Village Board
decide to revoke the Agreement and the underlying zoning, they are effectively putting the Property back
to square one. In that event, it is likely that the existing lender's will default the Developer on its current
mortgage loans. Arguably, foreclosure lawsuits will ensue in the Cook County Circuit Court. In the interim,
if the Village wants to pursue demolition of the buildings, it would need to file an action under the Illinois
Safe Property Act. In said lawsuit, the mortgage lenders would naturally intervene. Also, the could be
other litigation over the Property. By the time all of the litigation is sorted out, it will likely take 3-5 years
in court. The Cook County Circuit Court does not move that quickly in these types of matters. Then, once
the litigation is over and sorted out, another developer would need to start all over with the Village to get
the Property entitled and zoned all over again. That process in the past took several years and over 35
advisory and Village Board meetings combined .

The entitlement process was also very labor intensive and expensive with the necessary experts. It is not
unrealistic that it could take another 5-7 years of the Property sitting vacant and undeveloped should the
Village Board decide to unwind the Agreement. I truly hope the Village Board and Village officials will
weigh in on this when deciding how to move forward at the next Village Board meeting. Also, if the
Board's faith in the Developer is shaken in an irreparable way, revoking the Agreement and underlying
zoning will prevent a successor develop from taking over the project and moving forward quickly to get
the Property developed. It Is not in the Village of Winnetka' s best interest for the Property to remain
vacant and undeveloped. Also, as the Village Board knows, the Property is currently assessed, by the Cook
County Assessor as vacant, which it is. Having the Property fully developed and performing will necessarily
increase the amount of real estate taxes the Property pays in, to the Village's real estate tax levy thereby
diluting the amount other Village residents currently pay. So, for a wide variety of reasons, revoking the
Agreement and underlying zoning ' n reaction to a handful of displeased results to date, is certainly not
the most prudent way of dealing with the alleged defaults under the Agreement.

I would also like to take the opportunity at the meeting to apologize to the community-at-large for the
delay in starting the project and apologize for the condition of the soon-to-be demolished buildings. While
many of these factors were beyond my control and purview, it is our responsibility and I do not take it
lightly as integrity can only be earned.

Agenda Packet P. 97
All of us involved in One Winnetka take extraordinary pride for creating what One Winnetka exemplifies-
- most notably its forward thinking vision and simply Winnetka being "Winnetka" ... solving problems and
in this instance for a housing stock that is desired but currently doesn't exist. Walking home from the
train for years and seeing the dilapidated buildings in the east campus of downtown fueled my inspiration
and vision for the Development. While controversial at first, I am certain that the clear majority of
residents are excited for what the Development will bring and are eager to see construction commence.
Please do not hesitate to call me with any questions and I look forward to addressing the Village Board at
their next meeting on Tuesday August 6, 2019. Thank you for your consideration.

Respectfutly yours,

dt

David M. Trandel

Cc: Robert Bahan

David Schoon
John Murphy
John Diedrich
Wes Roitman
Glenn Udell
Richard Cavenaugh
Peter McDonnell
Skeet Walker

Agenda Packet P. 98