The City’s Planning and Development Committee was scheduled to consider last night a request from developer Robert King of Carroll Properties to amend the planned-unit development (PUD) proposal for 1890 Maple Ave.
Another request by the developer, not on last night’s agenda but expected to be considered later this month by the City’s Economic Development Committee, is for $1.9 million in City funds “to enhance the project’s financial and underwriting feasibility,” and to provide a rate of return “closer to market standards,” according to a letter from the attorney for the developer.
The Project
As approved originally, in Sept. 2007, the development was to be 158 feet tall, with 152 dwelling (rental) units, 40,000 square feet of retail space on the first and second floors and 269 off-street parking spaces.
Last August Council amended the planned-development ordinance to add two dwelling units, to reduce the retail space from 40,000 to 15,500 square feet and permit the retail to be only on one floor, to reduce the number of off-street parking spaces from 269 to 249 and to eliminate 44 off-site parking spaces.
In February of this year, Council granted the developer an extension of time, until October of 2013 to start construction and until 2014 to complete the project.
Council had given approval to the planned development in 2007, relying in some measure on a representation that Trader Joe’s had signed a letter of intent to open a grocery store in the development. After Council approved the extension of time, Trader Joe’s announced that it would not to be a part of the development.
New Proposed Amendments
Still alluding to “the potential arrival of a grocery store at the site,” the developer requested three additional changes, which were scheduled to be discussed by the Planning and Developement Committee last night: an increase in the number of dwelling units from 154 to 177, an increase in the first-floor retail to about 19,000 square feet and the addition of 45 off-street enclosed parking spaces.
Request for Money
The developer is requesting $1.9 million in City funds – “$400,000 in sales-tax reimbursement and $1,500,000 in TIF assistance” – according to a letter from David Reifman, attorney for the developer.
The letter, dated March 19, said, “[At] the time the developer was finalizing its lease with Trader Joe’s, the developer was in discussion with City staff and the City’s financial consultant, Kane McKenna, concerning the possibility of receiving approximately $1.9 million of City assistance.” That lease fell through.
The City funds are necessary, according to Mr. Reifman’s letter, “to enhance the Project’s financial and underwriting feasibility by narrowing the financial gap and providing the Developer with a rate of return that would be closer to market standards.” His letter adds parenthetically, “You should note that even with the requested City assistance, the Developer anticipated an 8.14 percent rate of return on its investment, which is still well below current market rates of return of 13-15 percent on an unleveraged basis.”
Because the Downtown II TIF, from which Carroll Properties is requesting the $1.5 million, will expire at the end of this year, the letter continues, the developer is further requesting that the City give him the $1.5 million by the end of this year, before the TIF expires, since the funds must be expended by the expiration date. The developer would place the TIF funds into an escrow account, where they “would not be used by the developer unless and until the developer has a signed lease with a grocery-store use and is ready to commence construction of the project,” Mr. Reifman’s letter said.
The letter also listed five benefits that would accrue to the Evanston community should the City make “a long-term investment in downtown” by providing the developer “with the requested TIF funds and a commitment to a sales-tax reimbursement in the future … increased sales taxes, new annual real estate taxes for the City (estimated at $120,000), $375,000 in building-permit fees; new job opportunities and redeveloping an underutilized parcel with a new grocery store and an apartment building that will be a catalyst for additional retail/commercial opportunities and which will also help to strengthen overall the vitality of downtown.”
Next Steps
The developer’s request for City funds was withdrawn from the March 25 Economic Development Committee agenda and is likely to appear on its April 22 agenda, said Martin Lyons, newly appointed Assistant City Manager.
Anticipating that the request would be discussed on March 25, Interim Community Development Director Dennis Marino and Economic Development Planner Morris Robinson prepared a memo for Interim City Manager Rolanda Russell recommending against the use of TIF funds.
Their memo says, “The developer’s request to obtain reimbursement of TIF-eligible expenses would generate unacceptable risk to the City, from the perspective of staff, because there is not any documentation that this project is financeable at this time. There are no financing commitments, no commercial leases and no pre-leasing of residential units.” In addition, they said, historically TIF funds are not disbursed until a project is “financed or under construction” and even then, they are disbursed incrementally.
The memo concludes that staff members would be “willing to explore federal stimulus resources to help finance proposed and approved new development projects like this project, which has been stymied by frozen capital markets.”
Mr. Lyons told the RoundTable that the City and the developer are still talking about the request. “In this economy if you can have a win-win situation, we’re for that,” he said.