The city’s real estate consultant told Evanston’s Economic Development Committee Wednesday that the developers of the proposed Fountain Square tower are asking for more city financial help than necessary to rehabilitate the landmark Hahn Building next door.
Marty Stern of U.S. Equities said the proposed $3 million in tax increment financing assistance from the city could be reduced to $2 million or even less with various cost reductions.
The developers’ attorney, Steve Friedland, told the committee that buying and renovating the three-story Hahn Building will cost $11.2 million, and that the income the renovated building will generate would only justify an investment of about $6 million.
The developers propose picking up $2.2 million of the difference themselves, with the city contributing the rest.
Stern noted that the cost of acquiring the Hahn building is driven largely by the potential to build something larger on the site. In recent years two since-withdrawn development proposals have called for preserving only the facade of the building and constructing a high-rise building on top of it. And the city’s proposed downtown plan calls for a 42-story height limit on the Fountain Square block.
If the building didn’t have that development potential, Stern said, its market value would be considerably less.
Friedland said the developers “feel strongly that our assumptions are reasonable and supportable and remain committed to the request for the $3 million subsidy.”
Keeping a low-rise structure on the Hahn Building site has value to the developers of the 708 Church St. tower because it preserves views to the south from the planned tower and gives them more control over retail development on the block. It also provides them with opportunities to provide a place to relocate some merchants and office tenants who would be displaced by the tower.
But city officials also may find the plan appealing. The developers have pledged to sign a covenant barring any future redevelopment on the Hahn site, which would provide stronger protection for the building than exists under the city’s preservation ordinance. A renovated Hahn building would likely generate somewhat more tax revenue for the city. And it avoids potentially bruising future debates about the site.
On the other hand, Stern said, the tower proposal does not require acquisition of the Hahn Building. If it were dropped, he said, the developer profit earmarked to subsidize the Hahn work could be used to rehab the Fountain Square plaza instead.
Stern said the developers are not “wrong” in their assumptions about costs for the Hahn project, but that he believes several slightly less conservative assumptions could be used in assessing the project.
Those include anticipating higher rents and lower financing and tenant relocation costs than the developers have used.