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TO: Mayor Richard C. Irvin
FROM: David Dibo, Director of Economic Development
DATE: February 8, 2019
SUBJECT:
A Resolution authorizing the execution of a Real Estate Purchase and Development Agreement with Mora Asian Fusion Bolingbrook, LLC to facilitate the redevelopment of certain real property located at 43 E Galena Ave. in the City of Aurora, commonly known as the "Vargas Building."
PURPOSE:
To promote the continued revitalization of the downtown, the Economic Development Division recommends the approval of the Real Estate Purchase and Development Agreement between the City of Aurora and Mora Asian Fusion. Mora plans to open a restaurant similar to the three Asian fusion restaurants they are currently operating in Plainfield, Bolingbrook and Oak Park on the ground floor of the Vargas building. A second food and beverage concept on the upper floor is also being discussed and possibly a third concept on the lower level, should that be deemed feasible. (City Staff and representatives from Mora have had discussions regarding the importance of floodway determination, and floodway elevation to ensure flood proofing in the lower level which will impact the usability of this space).
BACKGROUND:
New restaurants in the downtown have been a long sought-out goal of the City, its residents and the rapidly 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 help break the chicken and egg pattern of residential development, stymied until the availability of the services that will attract tenants and restaurant owners, who insist on foot traffic before investing.
Jason Morales, Principal of Mora, was attracted to Vargas for its river front location and proximity to the Paramount. After the building was vacated by its previous tenant, its full potential became apparent. Mora concluded that the “raw” condition of the existing space, coupled with the substantial costs to outfit a restaurant, was an undertaking that required ownership rather than renting. Jason was concerned about amortizing these high costs and not realizing a return commensurate with risks associated with this investment. An agreement was reached that enables Mora 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 his own restaurant. The City on the other hand has owned and maintained Vargas for six years without realistic redevelopment prospects. While the Master Plan called for the building to one day be demolished in conjunction with a possible River Walk extension or perhaps a City Hall complex, this was deemed unlikely in a foreseeable timeframe. Still with the City seeking to preserve its options, an agreement was reached between the City and Mora that enables Mora to own the building while granting the City two options to re-purchase it under specified terms and conditions.
While it is proposed to sell the building for $1, the sale is conditioned on Mora spending the necessary funds, to fully renovate the building for a Mora restaurant.
The sale does not include the space that houses The Riverfront Playhouse, which, while currently part of this property, will be subdivided into a separate property with its own pin number.
DISCUSSION:
The rationale for the $1 price are the high costs for tenant improvement and the preparation of the building for a premium restaurant. There is little or no “residual value” in the existing building. This circumstance is similar to many spaces in the downtown especially those in need of substantial upgrade. The goal is to create an opportunity that enables an entrepreneur such as Morales to take the risks required to invest in a market that is anticipated, but not yet proven.
Other significant terms of the agreement include: 1) Mora’s right for a 60 day due diligence period to inspect all matters (title, survey, environmental. etc.); 2) The City’s right to affirm the liquid financial resources to fulfill Mora’s obligations for tenant improvement; 3) Mora’s right to outdoor seating on a portion of Water Street Mall as long as it does not obstruct pedestrian passage; 4) The sale is “as is”.
The City’s repurchase options will include the future appraised value and, in the event the City requires the property for a larger redevelopment, a provision to repay verified unamortized tenant non-structural improvements costs within the first 15 years of the agreement. The City’s right to repurchase does not have a sunset and will be a covenant that will be attached to any future owner of this building and its underlying land.
IMPACT STATEMENT:
This project will increase the City’s real estate tax base both at this property and, by encouraging investment and development, at the surrounding properties. Sales and food and beverage taxes will likewise increase. Quality of life will be positively be impacted and will verify a demand that is assumed but not yet realized. Employment will increase. Mora is considering various means to share its food and beverage expertise with the community in an educational setting).
RECOMMENDATIONS:
Staff recommends approval of the resolution authorizing the execution of a redevelopment agreement with Mora Restaurants subject to final approval of the City Corporation Counsel on finalization of the contract language.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
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A Resolution authorizing the execution of a Real Estate Purchase and Development Agreement with Mora Asian Fusion Bolingbrook, LLC to facilitate the redevelopment of certain real property located at 43 E Galena Ave. in the City of Aurora, commonly known as the "Vargas Building."
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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, Mora Asian Fusion Bolingbrook, LLC (the "Developer") has approached the City with a proposal to redevelop vacant property owned by the City at 43 E Galena Ave. (the "Vargas Building") and operate it as a restaurant; and
WHEREAS, the Vargas Building 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, Purchaser 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 agreement, 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 have negotiated a Real Estate Purchase and Development Agreement ("Agreement") to facilitate the Project and accomplish the foresaid objectives; and
WHEREAS, said Agreement is attached to this resolution as Exhibit A and incorporated into this resolution as if fully set forth herein; and
WHEREAS, approval of the Agreement is in the best interest of the City.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows: that the Real Estate Purchase and Development 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 a Real Estate Purchase and Development Agreement that substantially and materially conforms to the provisions of the Redevelopment Agreement set forth in Exhibit A on behalf of the City; 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 shall is authorized to execute such additional 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.