The developers of Lakeshore East have refinanced the massive mixed-use project with a big loan from an AFL-CIO pension fund that pays off existing loans and puts about $40 million in their pockets.

In addition to taking out some profit, the transaction gives the Chicago-based developers--a joint venture of Magellan Development Group Ltd. and NNP Residential and Development--fresh working capital for new buildings on the 26-acre site north of Grant Park.

"We're using this pot we've created from the early success of Lakeshore East to help fuel new deals," said David Carlins, an attorney and Magellan vice president.

In arranging the financing, Chicago-based MJ Partners Real Estate Services advised the developers. Cornerstone Advisors Inc., also of Chicago, advised the AFL-CIO Building Investment Trust, a $1.97 billion fund focused on real estate deals. When it is completed, Lakeshore East will contain 9.7 million square feet in about 17 buildings, including retail and office space, hotel rooms and as many as 4,900 residential units.

The $70 million loan underscores the rise in the value of downtown development sites amid the continued condominium building boom. And the refinancing is a remarkable turn for the huge project, whose prospects seemed dicey seven years ago.

Magellan-NNP agreed to buy the site in 1998, but couldn't close on the purchase for four years, as the venture steered the massive project through the twin challenges of zoning approval and financing.

"It's a deal that a lot of people thought would never get done," said Robert Byron, managing principal with Blue Vista Capital Partners LLC, a Chicago real estate finance firm not involved in the deal. "They're just plodding away, doing it."

In the 1990s Lakeshore East was considered so risky that Virginia-based apartment developer Charles E. Smith Residential Realty passed on an opportunity to partner with Magellan-NNP. In 2002 financing was so difficult to obtain that Magellan-NNP had to borrow nearly $24 million from the seller to buy the site. The total acquisition cost was nearly $81 million, including expenses.

That loan, a second mortgage from a joint venture of Metropolitan Structures, the developer of Illinois Center, and Minneapolis-based PepsiAmericas Inc., has since been paid off.

The land cost was reduced by $25.8 million when the developers sold part of the site to the city for streets and a park, though they contributed about $11 million toward the six-acre park, which opened this year.

Since the acquisition Magellan-NNP has worked to pay down debt through sales of land and several developments. .

"The AFL-CIO fund recognized that and stepped up," said James "Jake" Geleerd of Chicago developer Terrapin Properties LLC., which is not involved in the deal.

Two residential towers have been completed, including the Shoreham, a 550-unit apartment building that is being leased up. A second condo tower is under way. And later this year construction is expected to start on a high-end, 61-story condo tower, to be located at 340 E. Randolph St., a venture with developer LR Development Co. That deal values the site at $20 million.

The AFL-CIO fund is a joint venture partner in the Shoreham, with a $40 million investment.

The new loan provides the Washington-based fund with a potential pipeline of additional apartment projects, a key investment strategy for the fund, according to one of its loan summaries.

The seven-year loan replaces a LaSalle Bank mortgage that had been paid down to roughly $20 million. The increased size of the new loan reflects the greater value of the land, keeping the proportionate amount of debt roughly the same.

Part of the new loan must be set aside in a reserve, which together with other expenses reduces to about $40 million the amount the developers received, sources said. Carlins declined to comment about that aspect of the loan, but said it would be repaid out of future developments.

"We're replenishing the war chest," he said