Skokie Approves Sale Of 8000 North Site To New Development Group

SKOKIE, IL — Trustees granted preliminary approval Tuesday to sell village-owned property on the site of a 12-story residential development in downtown Skokie. The 8000 North project's new developers, who agreed to purchase the land for $1.5 million, said they are finalizing a loan and hope to begin work on the building by the end of September.

Plans for the 153-unit apartment building with retail space on the ground floor at the northwest corner of Lincoln Avenue and Oakton Street were first approved in February 2018 — more than two and a half years ago. A groundbreaking ceremony was held in May 2018, with village officials initially saying construction on the $64 million project would be complete by the end of 2019.

But the work stalled. The developers selected by village officials for the public-private partnership— Greenspire Capital, Pontarelli & Company and Hoffman Homes — took months longer than anticipated to receive approval from state environmental and transportation regulators and never secured financing for the project.

By the summer of 2019, the development team had pushed back the date of expected completion to June 2020. In the fall, developer John Dragic told Patch he was still working on securing a construction loan and the project would not be done before late 2020.

The development team did not manage to receive a construction loan for the project. By the spring, a new lead developer had taken over the project. An April 9 statement on the village website attributed the delay to the coronavirus pandemic.

"The current national uncertainty over COVID-19 is making it necessary to extend the timeline for constructing the 8000 North development at Oakton Street at Lincoln Avenue in Skokie," it said.

John Murphy, chairman and CEO of Murphy Real Estate Services, is the new leader of the development team, while the original trio of investors retained an unspecified stake after they were unable to secure a loan.

“They were out in the market before the crisis, and as time went on, it became clear that lenders were looking for a little more experience,” Murphy told Crain's Chicago Business in April. At the time, he told the Chicago Sun-Times he expects construction to take 15 months and hopes for completion by early 2022. He did not immediately respond Thursday to a request for comment about the project.

Murphy led the redevelopments of the Old Cook County Hospital on Chicago's Near West Side, which recently opened as a hotel and food court, the 500-unit Paragon apartment tower in the South Loop and the redevelopment of the Oriental Theater building in the Loop.

Participating via phone at Tuesday's Skokie Village Board meeting, Murphy said he is close to securing an approximately $45 million loan to advance the project.

"We're currently finalizing our loan negotiations with WinTrust bank," he told trustees. "We're getting all our documentation lined up and the equity raise has started. At this point, we have probably 75 percent of the equity committed and expect in the weeks ahead to round off and be probably moving forward in earnest with the project physically by the end of the month."

Investor Norm Hassinger, a member of the original development team, said the permitting process contributed to delays in the project.

"It's been a very complicated process with a lot of different governmental agency approvals," Hassinger said. "Even the FAA we had to get approval of, which is kind of ironic in itself."

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The village has so far spent about $6.8 million of nearly $8 million in planned spending on the parking garage, according to Finance Director Julian Prendi.

Michael Lorge, Skokie's village attorney, said the village used a revenue bond structure to finance the garage. He said that money will be partially repaid through lease payments on the garage that increase over the course of 10 years.

Payment of the $1.5 million purchase price and more than $700,000 in permit fees is deferred under the development agreement, which also requires the city to provide up to $7.245 million in tax increment financing money generated by increased property taxes at the site.

But the village is also set to receive a share of the purchase price should the project be sold in the future, ranging from 3 percent to 10 percent depending on the gross sale price, he said. In exchange, the village accepts what the village attorney suggested was a minimal amount of risk.

"The village is likewise participating in the financial structure as a back-back-back-back-backstop in the project," Lorge said. "There is, through the bank financing, some safeguards, and the village participates in those long after any investors are called upon or the developers are called upon or even some of the developers personally are called upon."

According to an unsigned copy of the development agreement included in the agenda of Tuesday's board meeting, if the ownership group defaults on a loan for the project — and Murphy fails to pay it within 10 days of its demand — lenders may demand up to $4 million from the village.

"So the village is really engaged in a real private-public placement effort, which is a very strong model being used all across the country," Lorge said. "We're really celebrating that we're able to build this kind of relationship and not only get the project done but provide an opportunity for the village to participate in any windfall profits at the time of the sale."

According to a statement posted Wednesday on the village's website, the project's financing is "secure," and more than 200 potential residents have "expressed interest" in the property.

Trustees unanimously granted preliminary approval to resolutions clearing the way for the new developer — MDG 8000 North Lincoln Owner LLC has replaced 8000 North LLC — to proceed with construction. Final approval is scheduled for the village board's Sept. 21 meeting.

Mayor George Van Dusen Tuesday praised the work of village staff and the development team on the 8000 North venture.

"I'm not exaggerating," he said, "when I say they have spent evenings working on — not just this particular agreement — but on this project."