City to take a new path to Block 37 - Metropolitan Planning Council

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City to take a new path to Block 37

Next plan won't depend on big retail complex
City Hall is exploring a different tack in its next effort to redevelop Block 37 — one that will abandon the focus on building a splashy retail complex.

In a document mailed last week to top developers and civic groups, the city floats the idea of developing the troubled site incrementally, possibly including 500,000 square feet of government office space, a museum, a high-end grocery store and a television studio. It even suggests a new name with more pizzazz — 108 N. State or Great Street Center.

The document summarizes conclusions reached at a conference the city held in September, after it pulled the plug on an ambitious but stalled plan that included a Lord & Taylor department store, condos and a hotel. The suggestions will serve as the basis for future planning.

"We have advanced the process," said Terri Texley, deputy commissioner for the central area at the city's Department of Planning and Development. "Most of what's in this document are ideas that we can support."

Developers acknowledge that it's a tough time to undertake any type of project.

"Retail sales are at an all-time low, and the capital market for making loans for new construction, including residential, has dried up," says Chicago developer J. Paul Beitler.

Still, developers say there's merit in a new selection process envisioned by the city.

As suggested by conference attendees, the city says it will issue requests for qualifications in January, and a developer would be selected based on past performance rather than any specific proposal for the site. The city would negotiate with the developer for a specified period.

"It would be better to consider developer's qualifications rather than specific proposals," says Daniel McCaffery, president of Chicago-based McCaffery Interests Inc., whose firm redeveloped the Reliance Building at State and Washington streets.

Putting together a proposal for a site like Block 37 takes hundreds of hours of staff work and hundreds of thousands of dollars, he says. And in the end, a subjective jury can quickly torpedo those plans for purely subjective reasons, such as antipathy toward the architectural style of the buildings.

Conference participant Peter Skosey, a vice-president of external relations for the Metropolitan Planning Council, says the new strategy will streamline the development process and increase the chances of pulling a viable proposal together for the project.

"Everyone's on the same page to prevent what happened last time," he says.

Starting over

After nixing the long-running plan of consortium FJV Ventures, the city in June began negotiations to acquire the land.

The plan, which called for a department store, a hotel and condominiums, fell apart when developers were unable to obtain financing. Despite its high-profile location in the center of the Loop, the land has sat virtually vacant since the late 1980s.

Sources say the land will cost as much as $40 million, a price close to the amount the city had pledged in tax-increment financing (TIF) for the project. A spokesman for the Planning Department says the city is moving ahead with the purchase but won't comment on the land's price.

Ms. Texley wouldn't discuss what kinds of subsidies would be offered to get the project under way. The amount of subsidy, as well as the final plan, is subject to approval by Mayor Richard M. Daley.

How much the city will be willing to pay in subsidies will be the key to the project's success, says Christopher Hill, former city planning commission and now a director at real estate services firm Grubb & Ellis Co.

"There's a perception that the city hasn't been able to develop the site despite the fact that the rest of the area is thriving," Mr. Hill says. "The real question is how much they'll be able to offer. The city is spending a lot of money to buy the property back, and the city's central TIF district expires in another six years."

While the slowing economy would make it difficult for government agencies to consider relocating offices to the site, such a use makes a lot of sense, Mr. Hill says. The Planning Department's Ms. Texley says the city has no interest in leasing office space at the site.

Additional uses for the site proposed in the report include including shops along State Street and condominiums, some of which might be time-share properties. Entertainment venues such as movie theaters, restaurants and nightclubs are also recommended.

No quick fixes

Given the current state of the economy and the shortage of financing for new projects, any redevelopment of the site could be years away, a number of prominent Chicago developers say.

"Regardless of the process, at this point in the economic cycle, securing financing for that site will be very difficult," says W. Harris Smith, principal of Chicago-based Smithfield Properties LLC, which recently redeveloped Block 36 at State and Randolph streets, among other State Street projects.

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