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Azzuri of Evanston, Inc., the company that last year purchased Evanston Plaza and plans to establish Valli Produce as its anchor tenant, is asking the City for about $9 million to help finance its overhaul of the plaza. Azzuri of Evanston is the name under which the Valli Produce ownership team purchased the plaza and plans to operate the grocery store.
On Feb. 23, City Council approved a $2 million forgivable loan to Azzuri, contemplating that terms for additional funding, not to exceed a total of $9 million, would be negotiated later. That amount was recommended by the City staff and the City’s Economic Development Committee.
The vote came near the end of the public session of the meeting, and Fourth Ward Alderman Don Wilson said he was “a little disappointed that there’s not anyone sticking around for the $2 million item on the agenda.
“What concerns me is that this is Phase 1 of a $9 million ask. It should be noted that the original purchaser [Bonnie Management] got [the plaza] for $8 million and sold it for $16 … I’m disappointed that this is what they’re having to pay. ” He said, though, that he is “thrilled at their commitment to the community.” His was the lone “no” vote.
Peter Braithwaite, alderman of the Second Ward, where the property lies, thanked his fellow aldermen and City staff for their work on the project. “I don’t think anyone sitting here would have been able to predict the twists and turns of where we are today.” The owners, he said, have been wonderful to work with. “They show up ready to work every day. They have been responsive to the neighbors.”
Ald. Braithwaite also said that considering the number of jobs that will be created – 200 expected at Valli and 175 from other tenants – and the potential for generating sales-tax revenues, “it’s hard for anyone to deny that the dollars will be well-spent.”
History of the Plaza
In 2012, the City of Evanston created a tax-increment financing (TIF) district for the plaza, to enable then-owner Bonnie Management to purchase it. At that time, the plaza had lapsed into foreclosure.
Bonnie Management and WHI Real Estate Partners purchased the property out of receivership from Bank of America in December of 2012 for $8 million. Bonnie asked the City for $2 million in TIF funds to enable the company to spruce up the plaza and attract additional tenants. In a TIF district, the tax increment – the difference between the property tax revenues generated on the property when it went into the TIF and as improved within the TIF – can remain in the TIF and be used for improvements and enhancements there. The Dempster-Dodge TIF will expire in 2034, if it is not retired sooner.
Bonnie said it would use the funds for landscaping, build-outs and canopy repairs. The City says these qualify as TIF-eligible expenses.
In June of 2012, City Manager Wally Bobkiewicz said the City wished to invest money immediately in infrastructure and upgrades so Bonnie would be able to attract strong new tenants. At that time also, City officials estimated that by 2019 there would be about $3.6 million in the TIF.
The City then authorized the disbursement of up to $2 million in TIF funds to Bonnie Management. Bonnie changed some of the signage and added some landscaping but was unable to attract sufficient new or permanent tenants to make the plaza seem viable. Paul Zalmezak, senior economic development coordinator for the City, told the Roundtable that Bonnie did not spent any of the money.
In 2013, the anchor tenant, Dominick’s Food Store, removed its stores from the entire Chicagoland area. The plaza remains largely vacant, though the tenants it does have seem for the most part to do well.
On Sept. 18, 2014, Valli Produce completed its purchase of the Evanston Plaza Shopping Center from Bonnie Management, reportedly paying $16 million for the plaza.
At about that time, the City Council effectively cancelled the redevelopment agreement it had with Bonnie Management – including the contemplated disbursement of up to $2 million in funds – and offered the same agreement to Azzuri. According to City documents, that resolution, dated Sept. 8, 2014, “effectively authorized” the substitution of “Azzuri of Evanston, Inc.” for “Bonnie Management.”
Negotiations proceeded, culminating in the request for $9 million in financial aid from the City.
For the present, City staff recommended that TIF assistance not exceed $2 million for eligible Phase I Development costs, which focus on improving the grocery-store space. The plan is to open the grocery store in May or June.
The $2 million “represents approximately 23% of the Phase I buildout costs, according to a staff memo, which also “recommends Azzuri return at a later date to pursue additional funding.”
That funding, said Mr. Zalmezak, could include the disbursement of additional TIF funds or be in the form of a sales-tax sharing agreement.
Mr. Zalmezak said that since Valli would be the anchor tenant of the plaza, “Azzuri has a vested interest in attracting quality tenants to the plaza. … Bonnie and Valli have different ideas of how to manage a shopping center – one is at a distance; the other is hands-on. … I have confidence that they as owners-operators will get tenants.”
The City now estimates that the TIF will generate about $9 million in revenues, based in part on the price Valli paid to purchase the plaza, said Mr. Zalmezak. The increased purchase price will likely result in a higher assessment and increased property taxes and revenues.
Because the Dempster-Dodge TIF district is relatively new and the plaza is not fully tenanted, there is not enough money in the TIF fund to cover the $2 million authorized at present for Azzuri. Thus the City offered a forgivable loan.
The terms of the forgivable loan appear to offer benefits to the community as well as to Azzuri. The agreement states that Azzuri “will not appeal the equalized assessed value of the property during the period of time the agreement is in place. Further, if the plaza is sold “for a profit greater than the acceptable return for the investment of this project (prior to the loan being completely forgiven),” the City would receive a proportional repayment.
Valli Produce says it will donate goods and financial support to local schools and charities and offer health and family-care assistance full-time employees. The company will also install a bike rack, LED lighting and high-efficiency mechanicals and plumbing.
Since the TIF has not generated sufficient funds to cover the $2 million, the City is proposing the forgivable loan. The amount will be paid incrementally as Valli passes certain development milestones. Mr. Zalmezak said the total amount of incremental property tax generated by the development over the life of the TIF is now projected at $9.3 million.