Minutes of 10/27/08 P&D Meeting Granting Original Two Year Extension for 1700-1722 Central Project

Central Street Approved Planned Development
Consideration of a request for an additional 2-year time extension for the 1700-1722 Central Street Planned Development (Ordinance 7-O-07), which currently expires April 5, 2009.

Ald. Rainey moved to approve the extension.
Chair Wollin called Mr. Robert Horne, co-developer with Mr. Jack Crocker of the “Eastwood of Evanston” project at 1700-1722 Central Street, to speak. Mr. Horne stated that they are requesting a two year extension to the planned development approval through April of 2009, based on how poor market conditions are for residential real estate. He added that the project is a 51-unit condo project with retail on the ground floor. He said they continue to be committed to the project and that they have structured the project with a very patient and smart approach to the capitalization but they just cannot make it work and need additional time to weather out the market.

Mr. Jim Hughes of 2518 Hartzell asked why they are asking for an extension at this time since the approval is for April of 2009 and we may know more about the market at that date. Mr. Crocker responded that they need pre-sales for this project and that the market is currently dead for their type of project: they have not been able to get the pre-sales they require, saying that these conditions are unprecedented. He said they have been tracking sales in the $450,000 - $800,000 range from June through September of 2008 on the Multiple Listing Service, and only 7 units have sold, which is remarkably low, indicating that this market has virtually stalled. Mr. Crocker explained further that it will take some time for this market to heal because many of the condos on the market currently are being converted to rentals until the market picks up again (the projects on Kedzie and the Greenbay and Emerson) and they will all have to be sold off before the new

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construction will be sold. He added that they have every incentive to more the project along as fast as possible. He said they have patient equity capital and a very modest loan but there are real estate taxes, interest on their loan and interest that their patient equity capital is expecting, all of which grow with time. He said if they could start it tomorrow they would, but they feel to be safe they need a 2 year extension. For themselves, they need to know that the project remains in play for that time to ensure that the effort and additional expenditure is justified and that certainly the bank lender wants to know that the project they are financing is able to be built or they are not going to extend the loan. He said the loan they need and their equity capital depend on the extension of the planned development, and as the sponsors, they know it will take that long to get it going.

Mr. Hughes asked whether they would be changing the units to rental units and the retail space to office space. Chair Wollin advised him that the developer must proceed with the approved planned development as it was originally planned. Mr. Crocker also said that they did not plan to change the project.

Mr. Hughes pointed out that if the building is not built until 2011, 4 years after the Central Street plan was approved, the City will be missing out on property taxes in the meantime and asked that the City consider this when they are considering whether to approve the extension. Mr. Crocker responded that he appreciates Mr. Hughes’ concern over the taxes and does not believe anyone could have foreseen the current market conditions. He said the project has proceeded to the point where the derelict movie theater buildings have been removed and the site has been cleared, graded and seeded and the construction fence is down, adding that the entire neighborhood is better off with that building down and a temporary piece of open space. He repeated that he would love to get the building going and improve the neighborhood, as was his original plan. He added that regarding permit fees and real estate taxes, granting the extension is the fastest way to realize those because in this market, nobody else is going to do anything.

Mr. Joe Hill, who lives on Broadway in the 7th Ward, stated that he is dismayed at the lack of notification that this building was coming up for some other action, since the City has already granted this building an extension. He said he thinks it should be denied. He asked how long we can have a vacant piece of property, and asked what it does to Evanston’s tax revenue. He said he does not believe the City can afford to carry developers until they get back on their feet and asked that the City require that the project begin by the original extension date: failing that, that they have 6 months to sell: failing that, the City should take it over and leave it as the green space it is.

Mr. Jeff Smith of 2724 Harrison, stated that the neighbors and residents share the pain of the developers and they would love to see it built and fully occupied. He said his concern is that the City, in this case, has made decisions in the midst of a real estate bubble. He stated that these conditions are not unprecedented as history has shown that similar conditions existed in Germany in the 1930s and in the post war housing market in this country. He explained that the problems are not only with the mortgages, but that the supply is greater than the demand: vacant houses and lots are caused by people holding on to values that no longer hold. He said an economist would say to the comment that nothing can be built under these conditions, is that if you built something at a lower price, it would sell. He suggested asking for more detail as to when the developer believes the market will come back. He said he doesn’t believe the peak years will return; he does believe Evanston’s market will come back but at some point but he would be willing to support some change in the nature of the project in respect to the number of units, price of units, etc. that makes sense for the developers and that would cause this project to begin faster, adding that it is still being carried on the tax roles as a one story building and will soon be a vacant lot.
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Ald. Rainey informed Mr. Smith that we have 19 units of affordable housing in the range of $100,000 a unit that have been sitting for almost 2 years now and his suggestion of lowering the price will not help the situation.
Ms. Mary Rosinski of 1729 Chancellor stated that she agrees with the other neighbors. She said that regarding Ald. Rainey’s comment on Reba Place, they are not offering much of an incentive to realtors, which is necessary sometimes. She believes they would have sold, given the right price. She said that in another 2 or 3 years the developer of this project may ask for another extension. She asked the Committee to consider the prices of these units based on what is out there, before making their decision.

John Zbesko of 1129 Noyes Street, stated that he is opposed to this extension of the planned development. He said economic conditions have changed, as acknowledged by all sides and what may have been the best use of this property is no longer the case, as evidenced by the fact that the building has not started in spite of the current extension. He said that by granting a further extension, the City risks delaying development for another 2 years and foregoing any increase in property value and taxes that could occur if an alternative development plan were proposed. By refusing this extension, he presumes the developers will be more motivated to consider alternatives to their original plan, hopefully resulting in new development before 2 years, though there is no guarantee that even if the extension is made, we will see a condo building in 2 years.

Ms. Mary Therese Staub of 2627 Broadway, asked what the procedure is for an extension to a planned development. She and her neighbors did not think any further action would be taken by the City on this project until closer to April. She asked whether the neighbors were supposed to be notified about this meeting as part of the procedure. Mr. Marino responded that there is not a requirement for neighbor notification related to an extension of a planned development, adding that what is required is what had been done: posting of the agenda of the Planning and Development Committee.

Ald. Tisdahl agreed that in 2 years the project may be back for another extension and said that does worry her. She said she supports an extension of 2 years but she warned the developers that she does not think it will be granted again after that. She said they may need an alternative plan that will work at that time. She said that if the Committee denies the extension at this point, it will remain vacant and the City does not have enough money to take it over. She concluded that she expects the developers to come back in 2 years with an alternative plan.

Ald. Rainey said a sure way to get the property off the tax rolls is for the City to buy it and that it makes no sense and just because there’s no improvement on the property, it doesn’t mean it is off the tax roles. She is sure they are paying some property tax. She said the public has a right to purchase real estate and if they want to keep it vacant forever that is their business but the motivation of developers is profit so she is sure they don’t want to delay this project any more than 2 more years. She said believes Mr. Crocker wants to build on it as soon as they possibly can, as anyone who owns a piece of property would.

Ald. Tisdahl agreed with Ald. Rainey but said it may not be possible to make a profit in 2 years’ time and that she will hope to see a viable plan in 2 years.
Ald. Rainey clarified to Ms. Rosinski that she was not only talking about the Reba building when she referred to affordable housing vacancies. She said she has 3 vacant buildings plus a vacant house that she knows about in her ward and that the developers are asking the City for help in carrying those vacancies.\

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Chair Wollin agreed that there are vacancies in all wards and that the City does not want to own property.

Ald. Bernstein said he does not have difficulty with an extension. He said the market will decide the outcome and that is the risk the developer takes. He said he does not believe we can determine with certainty when the market will turn around and that he has vacant property in his ward also. He said he is also concerned about the 2 year length of the extension. He requested that the developer report back to the Committee in a year and commented that this is the strangest market he’s ever seen however he also saw the biggest boom in Evanston’s construction. He added that he would consider an 18 month extension. He agreed that it is in Mr. Crocker’s and Mr. Horne’s best interest to get the project going. Ald. Rainey responded that an alternative to the 18 month extension is Ald. Tisdahl’s suggestion of finality on the 2 year extension. Ald. Bernstein pointed out that there will be a subsequent Committee who could make a different ruling at that point.

Mr. Crocker argued that no one can be sure when this market will turn but when it has come down as far as it has, it has a good deal of improvement to make to get back to where it can begin to justify new construction and units priced based on new construction. He explained why their equity providers and their lender are urging a 2 year extension saying that it does have a lot to do with when the supply and demand will balance and that putting much of the existing supply into a rental pool for a year is not solving those developers’ problems, it is allowing them to carry the project with a little less pain until that better day arrives. He explained further that those units that were originally developed for sale, temporarily rented, will again be units for sale and that is part of the supply that has got to be brought into balance, and that it will take about 2 years for all those units to clear out. He said he believes that the unique characteristics of Evanston: the diversity, the infrastructure, particularly the public transportation and the school system, will cause the market in this community to come back, especially this project which is between 2 tremendous transportation services, but it is going to take time and that that is the advice they are getting from their equity providers and their lenders. He said they must be able to go back to their lenders and tell them they have reasonable time for the supply to work itself back into balance.

Ald. Moran argued that under the circumstances, the request for 2 years is a very rational and defensible one and that no one can figure out when this economy is going to turn around. He said agrees that Evanston will rebound some day but his perception of what is going to happen would be well beyond a year. He agreed that there is going to have to be a stabilization of the market, that it isn’t clear when that is going to happen and that nothing will happen before that. He said he believes it is going to be at least 2 years. He said he understands the impulse to reduce it to a year but a year won’t make a difference.

Ald. Jean-Baptiste said he agrees that a 2 year extension seems reasonable. He is not able to see the negatives of granting a 2 year extension in light of the current conditions unless members of the community are saying that the lot needs to be improved, so he said the City should make sure that it is properly landscaped, etc. because forcing a sale to a brand new project to be debated about in detail is not reasonable at this point. He said we have to be careful about the many projects we have outstanding because this is the reality for almost all of them and that developers will ask for extensions. He said we can help manage the situation so that these lots are not negative places in the community that they are maintained properly so they do not negatively impact the surrounding properties. He said he understands peoples’ anxiety about trying to get something done there and elsewhere but the reality is that we are stuck right now and we have to recognize it and try to work with what we’ve got.
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Ald. Bernstein said he has been persuaded and he will have to adopt a new reality. He asked Mr. Crocker what their plan is if they cannot sell the units in 2 years. Mr. Crocker responded that he believes this is a great project in a great location in a great city and he wants to be part of it. He said that if they wake up in a year and a half in a new reality entirely, they will be flexible in their ideas and see what makes sense for the community and for themselves, but he said he believes that in this community, in that location with the infrastructure that supports it, it is precisely the kind of development that will be the first to get going when the market returns. He said we don’t need more sprawl in corn fields; what we need is quality developments in special communities like this that are well served with public transportation. So, he said, they are committed and they are going to push hard to see this project through, but they are practical and will open their eyes when the market comes back and if things revisit their plans if need be. He said he will be happy to come back in a year or any time and give a formal report on where it stands.
The Committee voted unanimously to pass the motion for an extension of the planned development.

The link to these minutes is here.