By The Beachwood Preservation Affairs Desk
May 21, 2007
Ms. Gail Spreen
President
Streeterville Organization of Active Residents
Dear Gail:
I was very disturbed to receive your e-mail that the SOAR board had voted to recommend that 850 Lake Shore Drive be designated as a Chicago landmark.
Northwestern University strongly believes that such a landmark designation will have adverse unintended consequences and will result in substantial financial harm to Northwestern.
We explained our process and the Fifield proposal at a previous meeting with you but I would like to meet again with SOAR to further explain the situation in hopes that the SOAR Board will reconsider its decision.
Northwestern has acted in substantial reliance upon the City’s approved Planned Development for this site in maintaining the building to this point in time and in seeking a buyer consistent with the terms of the PD.
Moreover, in furtherance of that PD, we have entered into a contract to sell the property to Fifield Realty. We spent millions of dollars maintaining the building until it outlived its usefulness and Fifield has expended over a million dollars to undertake the contract and to develop plans for redevelopment.
As you may remember, the process for LR’s development of condominiums along East Pearson Street was a long and very open public process. During that process, the community expressed its concern about the future redevelopment of 850 Lake Shore Drive; the community wanted assurances that we wouldn’t come in with a future proposal for a very high and dense redevelopment on that site.
As a result of the community’s expressed concerns and as part of the approval process for the LR redevelopment of the former AHA building site, Northwestern agreed to restrictions on the redevelopment of 850 Lake Shore Drive. Those restrictions limited the height of a replacement building to no more than the height of the existing building (217′), the density of a replacement building to no more than 354,000 sf and the uses to student residences of no more than 490 units (and ancillary uses) or a private residential building of no more than 200 units.
The City codified those restrictions as part of the Planned Development. Additionally, in order to reinforce our commitment to the constraints on future development, we established restrictive covenants on the land running to the LR development that mirrored the constraints in the Planned Development.
Proposals that have been discussed for either a hotel or retail use violate not only the Planned Development constraints but the restrictive covenants as well and could not be approved. During this entire process, neither the community nor the City asked for a requirement that the building not be demolished and redeveloped nor did they ask that the building be designated a Chicago landmark.
In fact, the City granted an approved Planned Development that makes clear that the property can be demolished and rebuilt. We believe that the City passed on landmarking the building at the time that the PD was granted.
The Northwestern University trustees and administration have a fiduciary responsibility to support the educational and research missions of the university. Our responsibility was recognized by the State in its original charter granting us tax exemption. When it became clear that 850 Lake Shore Drive was no longer serving a useful purpose for the University and that keeping it open in its current configuration was resulting in a substantial financial deficit, we made the decision to close the building.
Our internal analysis showed that there was no financially feasible way for Northwestern to renovate the building for student residences; we then made the decision to sell the property. Landmarking the building would negate the sale to Fifield Realty and would result in substantial financial harm to both Northwestern and to Fifield.
Northwestern has no viable alternatives for the use or the sale of a landmarked 850 Lake Shore Drive and it is highly likely that the building would remain vacant for years to come. We believe that, given the circumstances that exist, landmarking the building would deprive Northwestern of its rights and raise serious legal issues that we would feel compelled to address.
We have acted in good faith in the process for the sale and development of 850 Lake Shore Drive and kept SOAR informed at each major step in the process. Because of the private and confidential nature of real estate transactions, we could not involve SOAR in the details of the process.
When NU made the decision to close 850 Lake Shore Drive, we informed SOAR of that action. When we decided to seek a broker to market the property for sale and subsequently selected Holliday, Fenoglio, Fowler (HFF), we informed SOAR of those actions. And when we negotiated a contract with Fifield, we informed SOAR of that choice and brought Fifield forward to make a presentation of their proposal. HFF prepared an RFP for sale of 850 Lake Shore Drive that was distributed to scores of real estate developers. Since Northwestern believed that the Chestnut Street garage could be needed to meet the future needs of the campus, we were selling only the Lake Shore Center and put that forward in the RFP.
The potential sale of 850 Lake Shore Drive was also well known in the Chicago community and we received inquiries and offers from developers not on HFF’s initial distribution list. HFF reviewed the proposals and made recommendations to Northwestern about which proposals and developers were viable and which proposals agreed to live within the constraints of the RFP, the Planned Development and the restrictive covenants.
We did not receive any responsive and responsible proposals for the renovation of the existing building at 850 Lake Shore Drive. We also received proposals for redevelopment of the property which were not responsive to the terms of the RFP because they proposed new buildings that exceeded the zoning constraints; we rejected those proposals as well.
Fifield Realty has been conducting a very public and open process in discussing their proposal for the redevelopment of 850 Lake Shore Drive. They have sent out hundreds of letters to neighboring residents, have contacted all nearby building managers, have proactively contacted preservation groups and have established meetings with representative community groups (SOAR, GNMAA, etc.).
Fifield has openly discussed their financial analysis that shows that adaptive reuse is not a financially viable option. They have demonstrated that the cost for an adaptive reuse condominium project would be approximately $170 million with sales proceeds of approximately $90 million, creating an $80 million gap.
They have also discussed their analysis of an adaptive reuse rental project which would create a $90 million gap. Tax credits and façade easement credits might defray up to $15 million of the gap, but a $65-75 million gap would still exist. This is not a TIF district and a residential project of this type in this area would not be appropriate for a TIF; even if it were in a TIF district, the gap far exceeds what would be available as a typical maximum contribution. Therefore, Fifield’s analysis shows that there is no financially viable alternative for adaptive reuse.
We hope that this letter adequately depicts the adverse unintended consequences that landmarking the existing building at 850 Lake Shore Drive would cause and that you and the SOAR Board will listen to our case and reconsider your recent decision. We look to your response and would be happy to assist with a broader meeting of all neighbors. If you have any questions or need further information in the meantime please contact me.
Sincerely,
Ronald Nayler [Northwestern’s associate vice president for facilities management]
Cc: Alderman Brendan Reilly
Commissioner, Department of Planning and Development
President Henry S. Bienen
Thomas J. Murphy, Esq.
Richard Blum, Fifield Realty
Alan Schachtman, Fifield Realty
–
Previously:
* The 42nd Ward’s New Demolition Man.
* Landmark Ruling item: Reilly “hedging.”
* Reilly “holding off judgment.”
* Brendan Natarus item: Reilly rebuffs Reader.
Posted on June 12, 2007