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TO: Mayor Richard C. Irvin
FROM: Christopher Minick, City Treasurer/Chief Financial Officer
David Dibo, Executive Director, Mayor's Office of Economic Development
Alessandro Minnella, Senior Planner, Mayor's Office of Economic Development
DATE: October 22, 2024
SUBJECT:
An Ordinance approving an option agreement for the purchase of two properties located at 201 N Lake Street and 213 N Lake Street, and authorizing the City's officers and employees to complete the transactions contemplated by said agreement.
PURPOSE:
To approve a negotiated option agreement and direct various City Officers to take all actions necessary to complete the future acquisition of two properties as outlined in the option agreement made part of this approval.
The intent is to purchase two (2) properties located in the immediate vicinity of the Downtown core for Strategic Economic Development Purposes. The properties entailed in the acquisitions are 201 N Lake Street (P.I.N. 15-22-157-003), 213 N Lake Street (P.I.N. 15-22-157-002), being the northwesterly quadrant of the block bounded by Lake Street, Cedar Street, River Street and Spruce Street.
BACKGROUND:
The City continues to make investments to improve the downtown into a thriving mixed-use area and Staff has worked towards creating a new entertainment, shopping, and living district called the North River Street District. This new District will be located just north of our historic downtown. An area where new appropriate and exciting design guidelines, architectural styles, and features can be used to create a new destination that connects the Downtown with RiverEdge Park and the Aurora Transportation Center.
Strategic land acquisitions is what is creating this opportunity to plan. See the attached exhibit that illustrates the parcels owned by the City in this District as well as how these two important properties fit into the larger picture. It has taken over 40 years for the City to acquire these properties and there are only a handful of properties left to acquire.
Hence, staff has commissioned a downtown housing study (Zimmerman/Volk Associates, Inc.) and an architectural massing study (Solomon Cordwell Buenz) to reimagine valuable real estate currently not at its best and highest use.
Most, if not all of the recent development agreements approved by City Council have involved City-owned properties that were acquired by the City years ago as a strategic action.
Staff first became aware of these properties being available when potential users, mostly not for profit - not considered by staff to be the highest and best use - began to contact the City. Over the last several months staff has negotiated with the owner which has resulted in the attached option agreement.
The City seeks to purchase approximately a total of 0.46 acres of land (0.33 acres at 201 N Lake Street, and 0.13 acres at 213 N Lake Street). The acquisition of these two parcels will continue to add to the land owned by the City in this area (called the North River Street District) that has been strategically acquired over several decades as parcels become available for purchase.
Both properties are zoned B-2 - Business District, General Retail, and each has an existing building which is described below:
- 201 N Lake Street: a multitenant three-story masonry building, built in 1918. The building is fully occupied with ground floor office and retail (including a gym), and three apartments on the second and third floors. There is also an office on the second floor.
- 213 N Lake Street: a mixed-use retail/office and residential building, which also features a partially finished basement. Currently there is an office on the ground floor with one apartment on the second floor.
DISCUSSION:
The timing to purchase these two parcels is now. If the City does not purchase these two parcels there could be real negative ramifications. First, the city would lose the ability to plan for, and execute, a larger planned development on the block because these properties are positioned in the middle of the block with high visibility on Lake Street. Second, the property owner will put the properties on the market and could sell to uses that are not the highest and best use - they could even be purchased by non-tax generating uses. And third, as development occurs in this North River Street District the plan is to ensure that the surface parking spaces are replaced in structured parking and this block’s position in the district makes it ideal for a future parking structure if warranted in the future.
For decades the city has acquired land in this District as it becomes available. Not purchasing these two parcels would be a missed opportunity.
Future development will increase the property taxes on the property once developed. Combined, the two properties currently generate approximately $18,000 in property taxes which is only a small percentage of the significant property taxes that could be generated if a larger development is constructed on this block within the envisioned North River Street District.
The City has negotiated a fair price of $1.3 million which includes $100,000, to secure the option, that shall be applied to the Purchase Price, payable upon the option is approved and executed.
The original asking price for both properties was $1.5 million. However, the appraised value for the two properties was approximately $1.1 million which is slightly below the agreed upon sale price. The total amount for both properties is recommended to be $1.3 million plus closing costs not to exceed $30,000.
In terms of property value, the smaller individual parcels have a lower appraised price on their own, however, in terms of economic development potential, in the future if these two smaller lots are developed as part of a larger cohesive development the value to the City is much higher.
Per the option agreement stipulated and agreed upon, “Seller shall, immediately upon resolution of all survey and title objections, deliver a 30-day notice to terminate the specified tenancies. If any tenant fails to vacate the Property within 30 days after receiving such notice, the Closing Date shall be automatically extended for a period not to exceed six (6) months”.
It should be noted that there are existing five tenants in the buildings, two commercial leases and three residential leases; all expired but on a month-to-month basis. The option agreement addresses this by requiring the seller to “use commercially reasonable efforts, at its sole cost and expense, to remove any remaining tenants from the Property”. If the seller is unable to deliver possession of the Property free and clear the City will and shall have the right, “at its sole discretion, to either (i) further extend the Closing Date for an additional reasonable period agreed upon by both parties, or (ii) terminate this Agreement by providing written notice to Seller, in which event Seller shall promptly refund the Option Payment to Buyer and both parties shall be released from all further obligations under this Agreement, except as otherwise expressly provided herein.”
Upon execution of the option, funding in the amount of $100,000 will come from a combination of TIF #5 funds (approximately 75%) and non-TIF #5 (approximately 25%); as follows:
- $75,000 from 235-1830-465.71-01
- $25,000 from 215-4411-417.71-01
Funding, in the amount of $1,230,000 for the purchase and closing of both properties will come from a combination of TIF #5 funds (approximately 75%) and non-TIF #5 (approximately 25%); as follows:
- $922,500 from 235-1830-465.71-01
- $307,500 from 215-4411-417.71-01
The properties are under contract for a period ending 365 days from the date of the execution of the option agreement.
Per the obligations stipulated in the option agreement, the seller shall be responsible at their own expense to surrender the properties free and clear of any tenancy.
As part of the due diligence process, staff has commissioned environmental assessments and reviewed the appraisal report and have determined that the acquisitions are in the best interest of the City.
IMPACT STATEMENT:
The purchase of the two properties will provide greater flexibility for future development opportunities.
Acquisition and development of these properties will have a positive impact by allowing future parcel consolidation for a larger more cohesive development resulting in an increased Equalized Assessed Value. Not approving this acquisition will result in the City losing the opportunity for parcel consolidation and the ability to achieve the most desirable uses for these properties.
RECOMMENDATIONS:
That this ordinance be approved.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
ORDINANCE NO. _________
DATE OF PASSAGE ________________
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An Ordinance approving an option agreement for the purchase of two properties located at 201 N Lake Street and 213 N Lake Street, and authorizing the City's officers and employees to complete the transactions contemplated by said agreement.
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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, pursuant to the authority granted to it under the Illinois Constitution, the laws of the State of Illinois, and the common law, the City has the authority to acquire the real property, and appurtenances attached thereto, commonly known as 201 N Lake Street and 213 N Lake Street, Aurora, Illinois, having Permanent Index Numbers 15-22-157-002 and 15-22-157-003 (“Subject Properties”); and
WHEREAS, the owner of the Subject Properties (“Seller”) desires to provide the City with an option to purchase the Subject Properties to the City in exchange for an option payment of $100,000.00, which would be applied to the purchase price in the event the City exercises the option to purchase; and
WHEREAS, the Corporate Authorities desire to enter into an option agreement, in substantially the form attached hereto as EXHIBIT A, to purchase the Subject Property from the Seller, for an amount not to exceed One Million Three Hundred Thousand and 00/100 Dollars ($1,300,000.00), plus reasonable closing costs; and
WHEREAS, funding in the amount of $100,000 for the option to purchase both properties will come from a combination of TIF #5 funds (approximately 75%) and non-TIF #5 (approximately 25%); $75,000 from account number 235-1830-465.71-01, $25,000 from account number 215-4411-417.71-01; and
WHEREAS, upon exercising the option, funding in the amount of $1,230,000 for the purchase of both properties and related closing costs will come from a combination of TIF #5 funds (approximately 75%) and non-TIF #5 (approximately 25%), $922,500 from account number 235-1830-465.71-01, $307,500 from account number 215-4411-417.71-01; and
WHEREAS, the Corporate Authorities have determined that obtaining the option to purchase the Subject Property, as substantially set forth in EXHIBIT A attached hereto, is in the best interests of the City;
NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Aurora, Illinois, as follows:
SECTION 1: That the Preambles set forth above shall be and are hereby incorporated in Section 1 herein, as if restated herein.
SECTION 2: That the Mayor is hereby authorized to sign and execute an option agreement substantially as set forth in EXHIBIT A attached hereto. The Mayor is further authorized to take all necessary action to exercise or determine not to exercise the option to purchase the Subject Properties, in consultation with the Corporation Counsel.
SECTION 3: That the Mayor, City Clerk, City Treasurer and Corporation Counsel are further authorized to execute any and all additional documents necessary to complete the purchase of the Subject Properties following approval of this Resolution.
SECTION 4: This Resolution shall take effect from and after its adoption and approval as required by law.