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TO: Mayor Richard C. Irvin
FROM: David Dibo, Executive Director
DATE: February 13, 2023
SUBJECT:
A resolution authorizing a Development Agreement with CL Real Estate Development, LLC/CL Enterprises, LLC for the purposes of facilitating the sale and redevelopment of the vacant Vargas Building, located at 43 E Galena Boulevard.
PURPOSE:
To promote the continued revitalization of the downtown, the Economic Development Division recommends the approval of a Development Agreement between the City of Aurora and CL Real Estate Development, LLC.
CL Real Estate Development, LLC plans to open a brewery and restaurant similar to the four restaurants they are currently operating in Ottawa, Lockport, Glenview, and DeKalb; Tangle Roots. A second food and beverage concept on the lower level of the building is also being discussed but will not start for at least five years.
City Staff and senior representatives from CL Enterprises, LLC have had discussions regarding the importance of floodway prevention, and floodway elevation to ensure flood proofing in the lower level which may impact the effective use of the space.
BACKGROUND:
New restaurants in the downtown have been a long-sought goal of the City, its consolidated population and the new residents attracted by the recently approved residential developments; and the increasing number of visitors that have been attracted to the City’s more popular destinations (Paramount, RiverEdge Park, etc.). Restaurants support a population living, working, or visiting a city that in turn adds to an environment that encourages more of the same. A restaurant at Vargas, will sustain and promote residential developments in need of hospitality services attracting tenants and providing options for visitors.
CL Enterprises (“CLE”), headquartered in Peru, Illinois, is the holding company for the businesses of husband-and-wife team Peter Limberger and Inga Carus. CLE’s investment focus is on the following industries: agriculture, basic manufacturing, real estate development, consumer products and hospitality.
Each of the restaurants, breweries and companies that belong to CL Enterprises have a unique product and/or service offering, characterized by unique products and service offering.
The brewery and restaurant concept being proposed is Tangle Roots, a successful model that not only embraces a sound business culture, but also community values, and the nature around us, brewing with hops and barley grown on their own farm in Starved Rock Country. Similarly, their unique chef-crafted menus are inspired by ingredients sourced from local farmers and growers.
An agreement was reached that enables CL Enterprises LLC to own the property and realize ownership benefits that would inure to any owner that created value after attracting a successful user, in this case Tangled Roots restaurant. The incentives to the developer entail the property located at 43 E Galena, be donated to the developer at a value of $100,000 and subject to the City’s repurchase right set forth in the RDA attached herewith.
To be noted, the donation of the property does not include the space that houses “The Riverfront Playhouse” located at 11-13 Water Street Mall.
DISCUSSION:
The anticipated initial investment for the restaurant on the main and second floor is $4,552,000 as provided in attachment A being the project proforma. The incentives being offered as a part of this Agreement are:
1) Sale of the property upon proof of funding and required metrics in the Agreement for $1.00.
2) Access to the site will be granted to CL Enterprises immediately following the execution of a binding Agreement to allow CL Enterprises to begin the work
3) The City’s right to confirm that CL Enterprises has sufficient resources either through equity or through private debt issuance to fulfill its obligations for tenant improvement and
4) CL Enterprise’s right to outdoor seating on the portion of Water Street Mall as long as it does not obstruct pedestrian passage, as defined by the City Engineer
5) The City shall fund the project in a total funding amount of $1,525,000 from two sources:
1) $900,000 Forgivable Loan amortizing in 10 years from the opening date of the restaurant at 5% interest, with both interest and principal forgiven as outlined in the Agreement and as provided in attachment B.
2) $625,000 Second Mortgage (City Loan)- Also a 10 year repayment period at 5% as provided in the agreement and as provided in attachment C.
6) Funding shall be provided on a pari passu basis ($1.00 of City funding for every $2.00 of Developer funding)
7) The forgivable loan and the City loan will be administered through a third-party escrow with Chicago Title Co.
The City’s repurchase option included in the RDA allows for the City, at its sole discretion, to repurchase the property up to the project completion date as defined in the RDA. This provision is similar to that provided in the Casino relocation redevelopment agreement.
Developer funding will be obtained from:
• A permanent loan of $1,090,000.00 (first mortgage)
• $1,600,000 in Historic Tax Credit Funding
• $250,000 in Developer Equity
This project is estimated to create a restaurant generating $3.0 million in annual sales, which represents a substantial increase in foot traffic in support of other downtown businesses and activities and is approximately twice the volume estimated from the original Mora project.
IMPACT STATEMENT:
This project will increase the City’s real estate tax base both at this property and, by encouraging investment development in the surrounding area. Sales taxes will likewise increase. Quality of life will positively be impacted and will verify a demand that is assumed but not yet realized. Employment will increase.
RECOMMENDATIONS:
Staff recommends approval of the resolution authorizing the execution of development agreement with CL Real Estate Development, LLC/CL Enterprises, LLC for the purposes of facilitating the sale and redevelopment of the vacant Vargas (former Culture Stock) building, located at 43 E Galena Boulevard, between Broadway and Stolp on Galena, adjacent to the City owned Hogan building at 51 east Galena.
ATTACHMENTS:
Exhibit A: Redevelopment Agreement
Attachment A: CL Enterprise Pro Forma
Attachment B: CL Enterprises Forgivable Loan table
Attachment C: CL Enterprises Construction Loan table
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
title
A Resolution authorizing Development Agreement with CL Real Estate Development, LLC/CL Enterprises, LLC for the purposes of facilitating the sale and redevelopment of the vacant Vargas (former Culture Stock) Building, located at 43 E Galena Boulevard, between Broadway and Stolp on Galena, adjacent to the City owned Hogan building at 51 east Galena.
body
WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, CL Real Estate Development, LLC/CL Enterprises, LLC (the "Developer") has approached the City with a proposal to redevelop vacant property on the second floor of the Vargas Building owned by the City at 43 E Galena Ave. (the "Property") and operate it as a restaurant; and
WHEREAS, the Property is currently vacant and has not generated any rental income for the City or housed a tax-generating business for a significant period of time; and
WHEREAS, the City finds that the Vargas Building will not develop without some assistance and incentive from the City with respect to the purchase price; and
WHEREAS, Developer has agreed to acquire and develop the Property as a restaurant in accordance with the terms and provisions hereof (the "Project"); and
WHEREAS, the City finds that as a direct result of the Project, the City will benefit
through the retention or creation of jobs; the strengthening of the commercial environment within the City and the enhancement of its tax base, and that the Project will serve as a catalyst for the commercial development of adjacent areas;
WHEREAS, the Project would not be economically viable but for the assistance and participation of the City, including the sale of the Vargas Building to the Developer for nominal consideration; and
WHEREAS, the City and the Developer negotiated a Real Estate Purchase and Redevelopment Agreement ("Agreement") to facilitate the Project and accomplish the foresaid objectives; and
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Aurora, Illinois, pursuant to its statutory and home rule powers, as follows: that the Agreement attached to this Resolution as Exhibit A shall be and hereby is approved; and further
BE IT RESOLVED, that the Mayor is authorized to execute an Agreement that substantially and materially conforms to the provisions of the Agreement set forth in Exhibit A on behalf of the City for sale of the Property, redevelopment of the Property as a restaurant and the provision of economic incentives to the Developer to make the Project economically viable, as set forth in the Agreement; and further
BE IT RESOLVED, that the several City Officers and employees designated in the Agreement are authorized to perform the function and duties set forth in the Agreement; and further
BE IT RESOLVED, that the Mayor is authorized to execute such documents or agreements between the City and the Developer which are related to and subordinate to the Agreement so long as (1) such additional documents or agreements are consistent with and do not conflict with the provisions of the Agreement authorized by this Resolution (2) are necessary to carry into effect the purposes of the Agreement, and (3) do not create any additional liabilities upon the City; and further
BE IT RESOLVED, that the City Engineer and the Chief Development Services Officers or any of their respective designees are authorized to take all actions on behalf of the City necessary to cause a subdivision of that portion of the Vargas Building to be occupied by the Developer and that portion of the building occupied by other tenants in compliance with the Plat Act and notwithstanding the provisions of the Subdivision Control Ordinance.