The Aurora City Council on Tuesday night approved three projects in or near downtown that mainly look to rehab historic buildings into apartments, along with financial incentives for those developments.
The Aurora National Bank building at 2 S. Broadway, the Franz building at 62 S. Broadway and the Company 251 building at 251 S. River St. are all now set to be redeveloped. The three projects are expected to bring a total of 88 new residential units to the downtown area, which city staff previously said has a “healthy” residential market since nearly all existing units there are rented out.
Incentives for the three developers will either be repaid to the city or paid out directly to the developer from the property taxes created by the new developments, meaning these projects will not be given any forgivable loans like others in the past.
The “gap” between what a developer needs to invest in a project and what they can expect to make from it has gotten smaller, but it still has not closed due to rising construction costs after the COVID-19 pandemic, according to city officials.
So, while rent prices in downtown Aurora are going up and forgivable loans are no longer necessary to incentivize development like they were before, some incentives are still needed to encourage development downtown, officials previously said.
Still, some aldermen took issue with the incentives. Ald. Ted Mesiacos, 3rd Ward, said JH Real Estate Partners, LLC, which is developing two of the projects, should instead look at putting in place a “growth strategy” using their existing downtown investments to move forward with the project.
Ald. John Laesch, at-large, said that, while he understands rising construction and labor costs, the City Council is supposed to represent Aurora taxpayers “who are also feeling the pain of inflation.”
Mayor Richard Irvin disagreed with Mesiacos and Laesch, saying that downtown Aurora’s “excitement and new energy” has only happened because the city invested in itself.
Irvin, Laesch and Mesiacos are currently all running for mayor in the Feb. 25 primary election. Jazmine Garcia, Karina Garcia and Judd Lofchie are also running for mayor in the election.
Ald. Daniel Barreiro, 1st Ward, said that, while he is not against the projects and thinks they will have a big impact on downtown, the city may need to pivot away from tax increment financing, or TIF, districts like the kind used for the three projects’ financial incentives because of the impact they have on school districts, particularly since the U.S. Department of Education could be closed and the state faces a funding deficit.
Other aldermen, including Ald. Michael Saville, 6th Ward, and Ald. Patty Smith, 8th Ward, said the projects and their financial incentives would be good for the city, as have past developments with incentives. Both Saville and Smith said JH Real Estate Partners has already proven themselves in the city.
“What better place to put all of our eggs in one basket than to the people who have proven their success,” Smith said.
The Aurora City Council voted 7-4 to approve the project in the Aurora National Bank building, then 9-2 to approve the projects in the Franz building and the Company 251 building. Barreiro; Ald. Edward Bugg, 9th Ward; Laesch and Mesiacos all voted against the first project, while just Laesch and Mesiacos voted against the second and third.
Ald. Ron Woerman, at large, was not at the meeting.
One of the two proposed downtown projects is the redevelopment of the upper floors of the Aurora National Bank building, which is already owned by JH Real Estate Partners.
The building’s fourth through eighth floors are set to be turned into apartments, while the basement through third floors would stay commercial space with its existing tenants, Martin Lyons, Aurora’s former chief financial officer and current part-time economic consultant, previously said.
The building is set to hold 30 residential units in total, according to past reporting.
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’s property tax bill would likely go up by around $100,000 because of the redevelopment, Lyons previously said.
The redevelopment agreement would give that full amount 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. If children do live in the building, then the developer would get less so that some of the funds could be distributed to the school district, with the amount based on the number of students living there.
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, according to a staff report about the project included with Tuesday’s City Council meeting agenda.
The other redevelopment project by JH Real Estate Partners is in the Franz building and 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.
JH Real Estate Partners plans to put 10 residential units in the building’s upper floors while converting the bottom floor into a possible restaurant. The restaurant would not be owned by the developer, but the plan is to remodel the space so that a restaurant could easily come in and customize it.
Similar to the project at the Aurora National Bank, the Franz building redevelopment incentive is planned to be funded through a TIF district, but there is currently not one on the building, so a new one would have to be approved.
The tax increment to be paid to the developers is 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 school districts 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 previously said.
Barrera, who recently got a different historic building redevelopment project approved by the Aurora City Council, previously said this apartment building would include a number of amenities in addition to the residential units. Those amenities include indoor pickleball courts, a fitness center and a theater room.
The apartments themselves are set to take advantage of the building’s exposed brick and timber.
Barrera previously said that he expects the apartments would be leased out even before the project is fully constructed.
Unlike the other two projects, the redevelopment agreement for the Company 251 building 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 is set to 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 will 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 previously said.
The processes needed to establish the two new proposed TIF districts are set to both start within the next few months, and once started those processes will take around six to nine months, Aurora Chief Management Officer Alex Alex Alexandrou told The Beacon-News on Wednesday.
rsmith@chicagotribune.com
