Northbrook Court Redevelopment Approaches Final Village Approval

NORTHBROOK, IL — The village board could consider a draft Northbrook Court redevelopment plan for the shopping center before the end of the month. The mall's owners hope to build a 315-unit apartment building atop a new grocery store, food hall, shops and restaurants at the Lake Cook Road shopping center.

Aimed at staving off the demise of one of the village's largest contributors of tax revenue, the $250 million project involves the demolition of the building currently housing a Macy's with a lease expiring next year and the construction of an 80-foot-tall apartment building on the southwest side of what is now the mall's parking lot.

In response to concerns from some neighbors to the south that the 80-foot rental structure would tower over their homes, invading their privacy and depressing their property value, the development team moved the residential structure about 27 feet away from neighboring houses and offered to construct a berm to obscure its parking garages.

Last month, trustees finalized the creation of a new tax increment financing, or TIF, district on the west side of the mall. As required by Illinois's TIF Act, the board declared the soon-to-be vacant department store as blighted, citing six of the 13 criteria allowing for the designation: obsolescence, deterioration, inadequate utilities, deleterious land use and layout, a lack of community planning and a lagging or declining assessed value.

The TIF district will capture all incremental property tax revenue resulting from the next 23 years of growth in the assessed value of the west portion of the mall. The school districts will, by law, be provided with 40 percent of the money collected from tax on the increased property value. The most recent equalized assessed valuation for the properties in the district is about $9.55 million, according to the village. Once the expected private development is complete, it is expected the valuation will rise to between $70 million and $75 million, according to a TIF qualification report the village commissioned from consultants Kane, McKenna and Associates.

In its third public hearing on the project last week, the Plan Commission directed staff to prepare a draft recommendation to the village board to be ready for final approval Tuesday. That would allow the trustees to grant approval on May 28 to a re-development agreement with Chicago-based commercial developer and property owner Brookfield Properties, formerly GGP, and Minneapolis-based Ryan Companies, its partner on the residential side of the project.

After initially requesting public-private partnership financing of up to $32 million, the developers have negotiated a $27 million request where $21.5 million would come by borrowing against the TIF fund, 80 percent of which would be tax-exempt, and the other $5.5 million would come from a sales tax rebate.

While the TIF district only applies to the west portion of Northbrook Court, the sales tax rebate is based on the total tax revenue of the shopping center. As a baseline, the village calculated the site's current sales tax base, added in a few hundred thousand dollars to compensate for the estimated increase in expenses to the village — such as increased demand for fire or police service — and locked in that amount before the sales tax rebate kicks in. Any further expansion of the mall's sales tax base would be split 50-50 between the village and the developers.

Northbrook Court is the village's largest taxpayer, both when it comes to the sales taxes it remits to the municipality and the property taxes it provides local school districts.

"It provides District 28 with over $2.5 million of property tax per year. It provides us with 25% of the sales tax we receive, the largest source of revenue to the general fund," said Village President Sandy Frum. "School Districts 28 and 225 have both signed off on the TIF believing it will benefit them in the long run. "

Several village trustees and plan commissioners expressed concern that if the site is not redeveloped as Macy's departs, the area would begin to appear blighted and quickly deteriorate.

"I look at this as very, very inexpensive insurance that one of our major taxing bodies, which is Northbrook Court, that contributes about 25 percent of our total revenue remains healthy," said trustee Jim Karagianis, ahead of an April 23 vote approving the TIF district. "I want everybody to understand we're not giving them any money. What we're doing is rebating future increases in value, and that is costing us nothing today."

At the board's prior meeting, City Attorney Steve Elrod had recommended trustees wait to receive a recommendation from the Plan Commission and a revised redevelopment agreement before granting final approval to the TIF district, warning that the developer may wind up not wanting to go ahead with the project at all.

"What you don't want is to have a TIF district created and the 23-year clock start to tick without an actual project. Villages do do that, they do a 'create it and they'll come type of TIF," Elrod said. "That's not what you have set out to do here."

But Trustees Karagianis and A.C. Bueller, who both officially departed office Tuesday after a combined 50 years of board service, requested a vote on the TIF district be held before the redevelopment plan was ready so they would have a chance to take part in the vote.

"I would like to be able to be in a position to vote in favor of this because I think it's important, and this is the board that it was brought forward to at that point in time," Bueller said. "So I don't want to have the fact that you've got a new board slowing things up as it comes through."

The Northbrook Caucus did not endorse Buehler and Karagianis, who had sought its nomination for additional terms on the board. The pair later decided against contesting last month's election as independent candidates and have been succeeded by new village board members JoJo Hebl and Heather Ross at the board's May 14 meeting. They joined Trustee Bob Israel, who was endorsed by the caucus and was elected to a second term.

Trustees voted to approve the TIF district by a 5-1 vote. Only Trustee Jason Han voted against creating the district. He acknowledged Northbrook Court was the biggest player in town but said every business in the village contributes and it was unfair for one to demand a 10 percent discount on its taxes.

"I see this as corporate welfare because of that. It's not fair that we ask people to pay their fair share, business to pay their fair share of sales and property tax, and simply because of the size of this business, they can say, 'Well, if you don't give us what we want we're going to take our ball and go home.' I don't believe that. I don't like that we don't know what the goals of these investors are," Han said on April 9, suggesting the public-private financing could wind up doing nothing but expanding the developers' profit margins. Han also said the project should set aside at least 15 percent of units for affordable housing, which is not currently a requirement in Northbrook.

"I understand the economics, and I also understand that in today's economic climate that these types of financial tools have become the norm for developers and it is very likely that they wouldn't develop without it," Han said ahead of the final vote. "I cannot in good conscience vote for this TIF."

The Northbrook Court TIF is the village's second such district. In 2006, trustees established a district at the northwest corner of Skokie Boulevard and Dundee Road, initially with plans for a $150 million mixed-use development at the 14-acre site called Center of the Northshore. Lead developer Edward Renko and several of his partners were arrested by the FBI in 2011 and accused of carrying out a $15.7 million mortgage and construction loan fraud conspiracy for the project. Renko pleaded guilty to wire fraud in November 2017 in exchange for a restitution payment of more than $21 million and what became less than two years of probation. The Skokie/Dundee TIF is now the site of the NorthShore 770 building and the commercial development anchored by a Mariano's grocery store.

Although the Northbrook Plan Commission did not take a vote on whether to recommend the redevelopment plan to the board when it heard the latest revision of the developers plans on May 7, a majority of commissioners suggested they were ready or nearly ready to issue a favorable recommendation. The hearing room was packed with residents, and nearly all of the speakers during the public comment portion of the meeting expressed dissatisfaction with the current plans.

Adam Tritt, senior vice president of development for Brookfield, thanked the commission for "pushing us pretty hard." He said the developers "realized we really had come up short" and attempted to be as flexible and creative as possible to come up with an improved plan. He said the development team held a meeting with a group of concerned neighbors.

"We had a very professional, very polite meeting held at our office at Northbrook Court, as we went through that discussion it became very clear that, although both sides sought compromise and I think both sides were there with very open minds," Tritt said. "Our needs were still somewhat divergent, and we left with a very clear understanding of what the neighbors wanted, which was a building 150 feet away from their homes, or other solutions."

Dan Walsh, senior vice president of the Ryan Companies, said the neighbors offered three acceptable options: move the residential component of the development all the way to the north, move it 150 feet away as required by setback requirements under the sites current zoning or have the developers purchase the home. None of them would be the right choice for the site, he said.

"But we listened to their concerns, we understand their concerns, so we are here today to introduce a plan that we believe minimize the impact to our neighbors," Walsh told commissioners. Neighbors primary worries related to the setback of 73 to 79 feet from the property line and the mass from an enclosed courtyard. He said the developers proposed earlier in April adding additional landscaping and reducing the size of south elevation of the apartment building. But the consensus from residents and plan commissioners was that it was not enough. "We heard loud and clear that both of those recommendations were insufficient," Walsh said.

In addition to worries from residents over the apartment building towering over the single-family homes across the street, some plan commissioners questioned the viability of the plan's apparent reliance on a 70,000-square-foot grocery store anchor tenant. The development team has been in contact with a potential tenant for the site but it has not yet been named publicly. Tritt, of Brookfield, told the commission that grocery stores were more resistant to losing money to online shopping than other forms of retail.

In the retail world, Tritt said, the apparel sector is shrinking while restaurant and entertainment uses are rising. Food sales in Northbrook have risen dramatically in the past two decades, rising from $68 million in 1999 to $142 million in 2017, he said, citing a study commissioned by the developer from consultant Melaniphy and Associates.

"That is not driven by population growth," Tritt said. "That is driven by true changes in the way people are spending their dollars." The study estimated about 17.4 percent of grocery store sales in the Northbrook area are "leaking from the trade area," he said. But a new grocery at Northbrook Court could generate 20 percent of its business from outside the trade area, according to the study.

"We want to be part of that traffic pattern, we want to serve that need," Tritt said, describing trips to the grocery store as unique and more common than other shopping trips. The retail portion of the project could be completed next year, pending board approval, with the residential component finished in 2021, he said.

Commissioner Mark DeBartolo asked Tritt about forecasts for the future for retail shopping centers. Tritt, a 20-year veteran of the mall landlord business, estimated about a third of malls nationwide could be anticipated to close over the next 18 months. He was asked what Brookfield would do, as owner of the property, if a redevelopment plan was not approved by the village.

"If we're not able to move forward with this redevelopment, we would have to go back and very seriously look at our options," he said.

Earlier:

• Proposed Northbrook Court Revamp Razes Macy's, Adds Apartments
• Hi-Five Sports Zone Opens At Northbrook Court
• Chicago Children's Museum Opens Northbrook Court Playspace
• Macy's Sells Northbrook Court Space To GGP For $25 Million, Leases It Back For 2 Years