A tower on the Fountain Square block shorter than the current 38-story design would not be economically viable, the city’s real estate consultant told Evanston’s Economic Development Committee Wednesday.
Consultant Marty Stern of U.S. Equities said that given the cost of acquiring the property, a building with significantly less salable space wouldn’t make financial sense.
Stern, who has advised the city on major development projects for many years, said the project couldn’t be built at all right now. "The financing markets are in complete disarray, the condo and housing markets are in disarray," he said.
"But we’re all making assumptions based on the history of the economy that eventually markets do calm down," Stern said. "The time to plan these projects is in times like these. Zoning will take a while. Design and financing will all take some time to get through" and by that time the market likely will look better.
In response to questions about the possibility of ending up with a vacant lot or a half-finished building, developer Tim Anderson said that the developers have pledged not to demolish the existing 708 Church St. building until after financing is secured for the project.
And, he said, in any project of this type, full financing to complete the project has to be in place before the banks will release funds to start construction work.
He said the banks required that 35 percent of the units be pre-sold before releasing financing for construction of the Sherman Plaza project and that he expects that requirement will be "slightly higher" when the tower project goes to market.
He said the current owners of the 708 building have agreed to extend tenant leases so that the tenants who choose to do so can remain in the building longer and have 120 days notice of when they’d need to be out.
The city consultant also reviewed eight public benefits the developers have claimed the tower project would provide, splitting them into three categories.
He said quantifiable benefits include:
- $21.8 million in new tax revenue over the life of the tax increment financing district that expires in 2018.
- $880,000 in developer contributions to the city’s affordable housing program.
- $1.6 to $3.2 million in added construction costs to achieve environmental certification of the project under the LEED program.
He said benefits that can’t be quantified include:
- Preserving the Hahn Building and retaining Class B office space. Stern said Evanston residents seem to support those goals, but a restoration of the Hahn building likely can’t be achieved without substantial subsidy.
- Enhancing the city’s retail core and emerging lifestyle shopping district. Stern said the tower’s addition of several hundred new downtown residents will help achieve those goals.
- Assuring a vision for the block. Stern said the proposed plan is a step in the right direction, but noted that without control of the Fountain Square building, the city would "need to retain a significant role in protecting the vision for the block."
Finally, Stern said two claimed benefits are questionable:
- The claimed "outstanding architectural design" of the project is too subjective to assess, he said, although outstanding design can benefit the public by improving the image of a neighborhood.
- Providing a "variety of housing options" with different unit sizes, Stern said, mainly benefits the developers by making the project more marketable.