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TO: Mayor Richard C. Irvin
FROM: David Dibo, Executive Director, Mayor’s Office of Economic Development
Alex Minnella, Senior Planner, Mayor’s Office of Economic Development
Martin Lyons, Economic Development Consultant, Mayor's Office of Economic
Development
DATE: January 27, 2025
SUBJECT:
A Resolution authorizing a Redevelopment Agreement (RDA) between the City of Aurora and JH Real Estate Partners, LLC (JH) for the redevelopment of the property located at 2 S Broadway, commonly known as the Aurora National Bank building.
PURPOSE:
The RDA will facilitate JH plans to redevelop the formerly known Aurora National Bank building at 2 S Broadway into a mixed-use building composed of thirty (30) brand-new market rate apartments.
The RDA codifies the commitments from JH that trigger City incentives that will be paid by the City as described below.
The City will have no upfront financial obligation in this deal and any incentive granted will be earned by new (incremental) taxes generated.
BACKGROUND:
JH Real Estate Partners LLC, (JH) whose managing members are Jay Punukollu and Harish Ananthapadmanabhan is the owner of the 40,000 building which also includes 15,000 square feet commercial space currently leased to Fifth Third Bank which is not part of the financial incentive and agreement described below.
JH is a well-known experienced developer which has successfully taken on the long-vacant Hobbs challenge to much acclaim and both the residential and restaurant spaces have been very successful.
The redevelopment of this building is another excellent opportunity to fill a housing demand and repopulate Downtown in support of downtown businesses.
DISCUSSION:
The proposed residential redevelopment of approximately 40,000 square feet comprised between floor 4 to floor 8 aims to repurpose office space into 30 new market rate apartments. Residential parking is available within the site and satisfies current and future needs of the ancillary commercial uses on the first floor.
This redevelopment is a cornerstone of the “second wave” of projects for the downtown wherein the City’s goal is to eliminate grants, and provide only loans that will be repaid, or provide "pay as you go" funding from newly created ongoing revenue sources.
The source of funding for this project contains the following:
1) private equity in the amount of $3,132,586.00.
2) Developer’s thirty party loan in the amount of $7,775,000.00
3) Historic Tax Credits in the amount of $4,505,340.00
4)Deferred Developer fee of $1,140,593.00
5) The utilization of the current Galena Broadway TIF to use the Tax Increment with NO upfront financial contributions by the City.
JH has noted that the Hobbs residential development has no school age residents and therefore requested the 100% allocation of the tax increment. This said, the agreement provides for revenue sharing with other taxing bodies according to a simple formula as follows:
1)If 1 to 5 students reside at the new development, then 10% of tax increment will be distributed to all taxing bodies.
2) If 6 to 10 students reside at the new development, then 20% of the tax increment will be distributed to all the taxing bodies
Distributions to the Developer and to the taxing bodies (if applicable) will come from the incremental property tax revenues generated by the 2 S Broadway development only and will occur until the expiration of the TIF or until the Incentive Cap is reached, whichever occurs sooner. There is no upfront City financial contribution to this development.
COA carefully reviewed the development team and would not greenlight the development until it satisfied itself that the team had the wherewithal to complete this complex project. Aside from JH, the development team includes Studio GWA, an architectural, design and planning firm that has proven its expertise and technical acumen to tackle the before mention and known Hobb's project; and Brick and Birch Construction (a full-service construction company with historic restoration experience). Together with JH’s financial and entrepreneurial resources, this team possesses the construction, architectural and historic expertise warranted by this prominent development.
JH’s commitment to this project and the increased viability of downtown properties is demonstrated by their willingness to commit $3.1 million (just over 20% of project funding) and defer their developer fee over a 12-year period in an amount of $1.1 million (7% of project funding), and guarantee a loan of $7,775,000 or a total of $11,975,000.
The developer can commit these resources due to the projection of very competitive rents for each apartment, which shows the continued increase in value of the downtown.
While increased rents have risen to a point where grants are no longer necessary, the post Covid inflation in construction costs creates a persistent, albeit much lower gap that will be filled by using the pre-existing TIF that was created 4 years ago in anticipation of such needs.
IMPACT STATEMENT:
The highly visible redevelopment will be a catalyst that will accelerate the process of bringing new residents and economic activities that will ultimately bring further developments and investments.
RECOMMENDATIONS:
Staff recommend the approval of the resolution authorizing a Redevelopment Agreement (RDA) between the City of Aurora and JH Real Estate Partners, LLC (JH) for the redevelopment of the property located at 2 S Broadway, commonly known as the Aurora National Bank building.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
title
A Resolution authorizing a Redevelopment Agreement (RDA) between the City of Aurora and JH Real Estate Partners, LLC (JH) for the redevelopment of the property located at 2 S Broadway, commonly known as the Aurora National Bank building.
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, JH Real Estate Partners LLC (JH) has approached the City with a proposal for the development of 2 S Broadway, for conversion of the historic Aurora National Bank building into thirty (30) market rate apartments; and
WHEREAS, the subject property at 2 S Broadway is currently located within the existing Galena Broadway TIF (TIF #10); and
WHEREAS, the City finds that 2 S Broadway will not be redeveloped without some assistance and incentive from the City with respect to the costs of buildout; and
WHEREAS, Developer has acquired the property and intends to redevelop the Property as a mixed-use development of residential and commercial space 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 creation of new residential units that will fill a proven gap in Downtown; and
WHEREAS, the project will strengthen the commercial environment within the City and the enhancement of its tax base, and that the Project will serve as a catalyst for the repopulation of the adjacent areas;
WHEREAS, the Project would not be economically viable but for the assistance and participation of the City,
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows:
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 redevelopment of the Property as a mixed use development with 30 new market rate apartments; 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.