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July 6, 2007
Booming suburbs yield bounty for longtime real estate investor
By Mike Dorning, James Kimberly and Ray Gibson, Tribune staff reporters. Tribune national correspondent Andrew Zajac contributed from Washington
July 6, 2006
During his long career in public service, House Speaker Dennis Hastert has amassed a multimillion-dollar fortune through real estate holdings that belies the humble image of a former small-town high school wrestling coach.
He lives on a 127-acre homestead near Plano that includes farmland, a pond and woods, situated along a creek and adjacent to a private forest preserve. Based on the price Hastert received for a sale of adjoining undeveloped farmland in December, his land alone is now valued at more than $4.5 million. In all, Hastert's net worth has soared from no more than $290,000 to more than $6 million during his 19-year tenure on Capitol Hill that has seen him rise from the back benches of Congress to speaker of the House.
Hastert's accumulation of wealth through a series of land deals has been the subject of recent scrutiny since a private research group last month questioned his sale of land near a federally funded highway project that he championed. The transactions appear to comply with the law.
In addition to the land in question, Hastert also owns a townhouse near the U.S. Capitol assessed for tax purposes at $399,000. He owns more property in Illinois, Wisconsin and Florida that together is worth more than $1.8 million. He carries little debt.
While others vigorously pursued riches in the stock market in the last 20 years, Hastert plowed ahead in land, aided in part by an inheritance of about $200,000 from his father eight years ago but primarily through a few profitable real estate transactions in his fast-growing suburban home community.
His biggest payday as a real estate investor -- $2 million -- has stirred controversy because it dovetailed with federal assistance he secured for the Prairie Parkway. As part of a real estate partnership, Hastert sold land that is 3 miles from the proposed freeway. The $207 million funding was inserted into the fine print of a mammoth federal transportation bill.
He accumulated that wealth while he earned an annual salary that has ranged from $77,400 when he first entered Congress to his current salary as House speaker of $212,100 and as he put two sons through college. His wife brought home a teacher's salary until she retired about six years ago.
Booming market cited
Hastert spokesmen say he has never used his political influence for financial gain, stressing that Hastert reaped rewards along with many other property owners amid a land boom in his home region.
"This is somebody who has spent close to three decades putting all of the spare money he has in properties," said Mike Stokke, the speaker's deputy chief of staff. "Some of those properties were successful and some were not."
Hastert declined to be interviewed for this article.
Critics have accused Hastert of profiting in an outsize way due to his position.
"I think what's going on with the speaker is he's saying, `This is good for my district. Why can't it be good for me too?'" said Keith Ashdown, vice president of policy at Taxpayers for Common Sense, a Washington watchdog group. "He's become a really rich man as a public servant."
Hastert and his supporters argue that he did nothing more than reinvest the proceeds from sales of inherited property and of his home in a booming local real estate market.
Stokke added that the speaker has been a public advocate for the Prairie Parkway for many years and that his intent to use his political power to press for construction of the highway has been no secret. Indeed, Hastert's advance maneuvering to fund the project was front-page news in the Tribune as long ago as 2001, a year before he began purchasing the land near Plano.
An examination of public records covering Hastert's financial dealings offers a picture of an enthusiastic real estate investor who consistently concentrated his wealth in property and repeatedly took advantage of opportunities to expand existing holdings either by purchasing nearby land or increasing his stake in partnerships. He started with property received from his family and his wife's family, but he has regularly committed his own savings to build his property holdings.
Hastert first began to reap substantial profits in 2002, when he moved from his Yorkville home and sold to a developer the surrounding land on Route 34, which has become a central corridor for growth in the region.
But his big winnings, responsible for most of his fortune, have come from the controversial tract associated with the freeway, land near Plano that he purchased in two transactions in 2002 and 2004. In addition to the sale of his Yorkville house, Hastert cashed in two other real estate investments during the months before the first of the two land purchases, tying his financial fortunes to the property.
According to Hastert spokesman Ron Bonjean, the speaker spotted the post-and-beam house that is now his residence and the surrounding farmland on his way home from a 4th of July parade in Dixon, Ill., in 2002. "He fell in love with the property when he saw it. It was his dream home," Bonjean said.
At the end of 2002, just after Hastert purchased the property near Plano, property records and congressional financial disclosures indicate that his net worth stood somewhere between $1.2 million and $1.5 million, less than a quarter of his current wealth.
In addition to the $2 million profit he already has reaped from the sale of land there, he still holds much of the tract purchased in 2002, giving him the potential for even larger gains.
Hastert entered Congress in 1987 a man of relatively modest means, worth no more than $290,000. His financial disclosure forms, which provide broad-range estimates, reported that he and his wife held assets totaling between $120,000 and $275,000. The largest: farmland from his wife's family in southern Illinois and a half-interest in a building in Plainfield, Ill., that had housed his father's Clock Tower Restaurant. He listed total debts of between $70,000 and $165,000.
The disclosure did not require him to list the equity he had built in his home at the time. But Hastert had just seven months earlier purchased a home in Yorkville for $225,000, Bonjean said. County records show that he had taken a mortgage of $140,000 when he bought the property.
Now his net worth appears to be more than $6.2 million, a figure that his staff does not dispute.
Hastert's most valuable asset is his homestead near Plano and the 127 acres of surrounding land. Hastert and his partners, including Kendall County Republican Party Chairman Dallas Ingemunson, received $36,152 per acre when they sold undeveloped land adjacent to the property in December. At that price, his remaining farmland is worth $4,591,000, not counting the value of his 3,500-square-foot house, a swimming pool and a barn he uses to house his auto collection.
Several local real estate appraisers said that value is consistent with recent prices paid for undeveloped farmland in the area.
Mark Akers, director of appraisal services for 1st Farm Credit Services in Sycamore, Ill., said recent sales of large tracts of land near Hastert's property have run between $24,000 and $36,000 per acre. Typically, property such as Hastert's remaining land would increase further in value because of the sale of adjoining land to a housing developer. The builder would have to run water and sewer lines out to the new development, which in turn would make neighboring land more attractive to developers, Akers said.
The speaker's other land holdings include a 126-acre parcel elsewhere in Kendall County he owns with Ingemunson and another partner. Land records show a purchase price in December of $3,154,000, making Hastert's one-third share worth $1.05 million. He also owns 275 acres of farmland on a bluff overlooking the Mississippi River in Eastman, Wis., that he purchased in December for $756,000.
And he owns 1.33 acres in north central Florida's Marion County, a horse-farming region that is home to some of the nation's championship thoroughbreds and has become a burgeoning haven for retirees. The tax assessor most recently valued the Florida land at $38,280.
His congressional disclosure forms show bank accounts and mutual funds with a combined value of between $20,000 and $125,000 at year-end. The same document indicates he had few debts: a mortgage on his Washington townhouse with a balance between $50,000 and $100,000 and a mortgage on his Plano residence that county records show had a balance of $520,000 as of February 2006.
An automobile enthusiast, he owns at least 10 vehicles, five of them antiques, including a 1942 Lincoln Zephyr Sedan and a 1956 Lincoln Mark II Convertible. He also keeps two 1950s open-cab Mack fire trucks, owned by his congressional campaign committee. He is not required to disclose the value of the vehicles.
Hastert began accumulating property long ago. As far back as 1982, a financial disclosure form he filed as a state legislator shows that he and his wife held an interest in farmland in southern Illinois' Macoupin County that they had inherited from Jean Hastert's father. In 1988, Hastert expanded the farm near Shipman from 104 acres to 270 acres by purchasing neighboring land.
By 1985, he also had a half-interest in the Plainfield building that housed his father's restaurant.
Shortly after he won his second term in Congress, he purchased the townhouse where he still lives when in Washington for $124,000, according to property records. For many years now, he has shared the two-bedroom, 1,400-square foot residence with his two top aides, chief of staff Scott Palmer and Stokke. Records show they paid him a combined rent between $5,000 to $15,000 last year.
He continued to expand his properties. In 1997, he acquired the land in Florida from his father, Jack Hastert. In 1998, when land adjoining his house on Route 34 in Yorkville became available, he purchased the property for $105,000.
Later that year, his father died, leaving the speaker with a one-third share (the rest went to his two brothers) of an estate valued at $575,000 according to a probate report filed by Hastert, who was the executor.
Hastert received much of his share in property, including another quarter-interest in the Plainfield building and a half-interest in the Tollgate Inn, a former restaurant in North Aurora.
Shortly afterward, Hastert began to shift his holdings. He and his wife sold the farm in southern Illinois in December 2000 for $418,000, according to county records. The year before he had reported a mortgage of between $50,000 and $100,000 on it.
Then, in May 2002, he sold the Plainfield building, receiving $300,000 for his share.
That same year, in July, he and his brother Chris sold the Tollgate Inn for $290,000. It is unclear how much profit the brothers made on the transaction.
In October, Hastert and his wife sold their home of 16 years and the land around it, raising $880,000 in two transactions.
Farm bought for $2.1 million
The Hasterts poured their money into a 196-acre farm near Plano that is at the heart of the current controversy over the speaker's real estate dealings. When they purchased the farm for $2,125,000 in August, they initially had to stretch, taking out a mortgage for more than $2million that they then paid down to $1,075,000 in November after closing on the sale of their previous home.
Jay Dockendorff, the previous owner, said he had listed the property in two ways, either $1.2million for the 17-acre core property that included the house and barn or the higher price for the full 196 acres. The farm includes woods with more than 10,000 trees, including oak, hickory and walnut, according to Dockendorff. The private Jay Woods forest preserve is adjacent.
Hastert was able to acquire the additional 179 acres for $925,000, or less than $5,200 per acre, a fraction of what he would later receive for the land he sold, according to Dockendorff.
In February 2004, Hastert took a one-quarter share in a partnership with Ingemunson and Thomas Klatt, a longtime political supporter and campaign contributor who owns a local trucking company, to purchase 69 acres adjoining the farmland near Plano. They paid $1,033,000, or just under $15,000 an acre, and financed the purchase with a $460,000 mortgage.
The 69-acre parcel was then joined with an adjacent 69 acres taken from Hastert's farm and in December 2005 sold to a housing developer for $4,989,000, or $36,152 per acre. Ingemunson said the partners apportioned the proceeds of that sale according to the acreage of land each had contributed, granting Hastert five-eighths of the proceeds, or $3,118,000.
Hastert and his partners have said the parcel from Hastert's farm did not have direct access to a road and that the parcel increased in value once it was joined with the partnership's land, which did front a road.
Critics have questioned the transaction, pointing out that the sale went through just four months after President Bush had signed the legislation that included federal funding for the Prairie Parkway.
The property is 3 miles from the intersection of the proposed route of the freeway with Galena Road, where the Kendall County Board has proposed building an interchange, although state highway authorities have not yet approved it. The property is 5 miles from a proposed interchange with Route 34, to which Hastert directed $55 million of the federal assistance that he secured.
Hastert has argued that the route of the freeway is not close enough to his property to affect its value.
Local critics, including Jan Strasma of Citizens Against the Sprawlway, have claimed the opposite, arguing that homeowners prefer not to live too close to a highway but do pay higher prices for houses with easy enough access.
The speaker remains confident in real estate. In a complex transaction designed to minimize taxes, he and his partners used much of the proceeds to buy 126 acres of land just south of the parcel they sold. Hastert also used some of his earnings from the sale to purchase his property in Wisconsin.
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Speaker's holdings worth millions
House Speaker Dennis Hastert (R-Ill.) recently came under scrutiny when it was learned that he made a profit of about $2 million as part of a partnership that bought and sold land near the route of a proposed freeway for which he secured federal funding.
Properties sold by partnership to which Hastert belongs
Home outside Plano, Ill.
Price: $2.1 million (Last year 69 acres of the original purchase, prorated at $748,087 of the purchase price, was transferred to the land partnership.)
Current value: Remaining land alone is worth more than $4.5 million.
Description: 127-acre property includes a 3,500-square-foot house, farmland, a pond and woods.
Kendall County parcel (co-owned)
Purchased: December 2005
Price: $3.2 million (Hastert's share: $1.05 million)
Description: 126-acre property bought by land partnership
IN OTHER STATES
Purchased: December 2005
Description: 275 acres of farmland overlooking the Mississippi River
Washington, D.C., townhouse
Current value: $399,000
Description: Provides living quarters for Hastert as well as rental income
Marion County, Fla.
Current value: $38,280
Description: 1.3 acres in a horse-farming region, transferred to Hastert by his father in 1997
Sources: Tribune research, IDOT