Three new projects in or near downtown Aurora are looking to put residential units in historic buildings, and Aurora is considering a variety of incentives to help those developments.
In total, the three projects are expected to bring 88 residential units to the area in and near downtown Aurora, which currently has a “healthy” residential market since nearly all of the existing units there are rented out, city staff told the Aurora City Council’s Committee of the Whole on Tuesday.
The proposed financial incentives designed to help the three projects would not include forgivable loans, and they would either need no upfront funding from the city or would guarantee the return of all funds that were advanced, staff said.
The redevelopment agreements for the three projects are set to be considered at Tuesday’s City Council meeting. All of the items were placed under the “unfinished business” portion of the meeting’s agenda, which means they will be separately discussed and voted on.
The two projects within downtown Aurora are both being proposed by the same developer: JH Real Estate Partners, LLC, which previously completed the redevelopment of the Hobbs Building, a 130-year-old structure on the corner of River Street and Galena Boulevard that now holds apartments and restaurants.
“I think we all need to be thankful that JH is here doing yet another project in our city because we can look at what you guys created with the Hobbs and know how successful you are and how successful you will be,” Ald. Patty Smith, 8th Ward, told Jay Punukollu of JH Real Estate Partners at Tuesday’s meeting. “You guys have done such great work with the Hobbs … so I look forward to seeing you move forward with this new project.”
One of the two proposed downtown projects is the redevelopment of the upper floors of the Aurora National Bank building at the corner of Broadway and Galena Boulevard, which is already owned by JH Real Estate Partners.
The building’s fourth through eighth floors would be turned into apartments, while the basement through third floors would remain commercial space with its existing tenants, according to Martin Lyons, Aurora’s former chief financial officer and current part-time economic consultant. He said the building would hold 30 residential units in total.
The financial incentive being considered by the city is through an existing tax increment financing, or TIF, district already on the building, according to a staff report on the project included with the Tuesday meeting’s agenda. That TIF district would redirect any extra property taxes generated because of the redevelopment of the building back to the developer as the financial incentive, so the developer would only get an incentive if the building is actually redeveloped.
The building currently has a roughly $50,000 annual property tax bill, but that would likely go up by around $100,000 because of the redevelopment, Lyons said.
The redevelopment agreement would give that full estimated $100,000 back to the developer each year until the Galena Broadway TIF District expires in around 20 years, but only if no children live within the building, according to Lyons. He said that, if any children do live in the building, then the developer would get less of those TIF funds so that some could be distributed to taxing bodies like the school district, with the amount based on the number of students living there.
That way, using the TIF district to incentivize this development would not have an impact on the school districts, since they would still get property tax funds to support any children living in the building.
Other than the TIF funds, which would likely only come in after the project is completed, the redevelopment would be funded using $3.1 million of private equity, $7.8 million from a third-party loan, $4.5 million in historic tax credits and a deferred developer fee of $1.1 million, city staff members wrote in their report.
The other redevelopment project being proposed for downtown Aurora by JH Real Estate Partners is in the Franz building at 62 S. Broadway, and at the vacant lot next to it. That building and lot are currently owned by the city, but under the redevelopment agreement, they would be donated to the developer for the project.
The developer’s plan is to put 10 residential units in the building’s upper floors while converting the bottom floor into a possible restaurant, according to Lyons. While the restaurant would not be owned by the developer, their plan would be to remodel the space so that a restaurant could easily come in and customize it, he said.
Punukollu said his company is already in talks with restaurant groups to go into the space.
Similar to the project at the Aurora National Bank, the Franz building redevelopment incentive would be funded through a TIF district, but there is currently not one on the building, so a new one would have to be approved, Lyons said.
The tax increment to be paid to the developers would likely be around $27,000 per year, but there are conditions similar to the ones in the Aurora National Bank agreement that would distribute some of that money to taxing bodies if children live in the building’s apartments.
Other than the TIF funds, the project would be funded by $965,000 of private equity, $2.1 million of loans, $2 million in historic tax credits and $500,000 in deferred development fees, according to a staff report about the redevelopment agreement.
The third redevelopment project is proposed for the Company 251 building at 251 S. River St., which is just outside of downtown Aurora in what the city is calling the Warehouse District. The developer, Aurora-native Fernando Barrera, is planning to turn the building into a 48-unit apartment complex.
The owner of Company 251 has decided to sell the building after renovating two of the four stories into an event venue because of recent changes in the business, according to a city staff report on the project. While Barrera does not yet own the building, it is under contract to be purchased, Lyons said.
Barrera, who recently got a different historic building redevelopment project approved by the Aurora City Council, said this apartment building would include a number of amenities in addition to the residential units. Those amenities would include indoor pickleball courts, a fitness center and a theater room, he said.
The apartments themselves would take advantage of the building’s exposed brick and timber, according to Barrera. He said that he expects the apartments would be leased out even before the project is fully constructed.
Unlike the other two projects discussed at Tuesday’s meeting, the proposal for the Company 251 redevelopment project includes a $2 million upfront loan from the city to help purchase the building. This money would come out of the new City Transformation Fund but would be paid back using a new proposed TIF district for the site, a different one than is proposed for the Franz building.
However, if the TIF funds are unable to fully make the loan payments back to the city, the developer would be required to make up the difference, according to Lyons.
Other than the proposed TIF-funded loan from the city, the project would be funded using a different $2 million loan to buy the building, $500,000 in equity to buy the building, a $2.7 million loan for construction, $3.1 million in equity for construction, $3.5 million in historic tax credits and $1.1 million in deferred developer fees, city staff members said in their report.
The proposed TIF district for the site would also include some nearby buildings to help encourage other redevelopment projects in the area, Lyons said.
Aurora Mayor Richard Irvin said many of the buildings in the Warehouse District, which is around River Street heading south from downtown, have been used for industrial purposes so there will likely be issues long-term that the city needs to address in the area, potentially using a TIF district.
The city’s plan was to only give out economic incentive grants and loans during the “first wave” of downtown development, but that plan was thrown off by the COVID-19 pandemic, according to Lyons. He said that, while rents are going up downtown, construction costs are also going up, which means the city has to continue to offer incentives to make up the gap between how much a developer puts into a project and how much that developer might make from the project.
However, the city now has to offer smaller incentives than before, since construction prices and rents are starting to get closer together and the gap is closing, Lyons said. Also, the city is not offering “forgivable loans,” which are basically grants, unlike what has been done in the past, he said.
rsmith@chicagotribune.com
