City of Chicago Department of Planning and Development

STAFF REPORT

TO THE COMMUNITY DEVELOPMENT COMMISSION

REQUESTING AUTHORITY TO ADVERTISE AND ISSUE A REQUEST FOR PROPOSALS

MARCH 8, 2016 I. PROJECT IDENTIFICATION AND OVERVIEW Project Name: The Old Post Office Building RFP Property Address: 401-439 W. Van Buren Street Ward and Alderman: 25th Ward, Alderman Daniel Solis Community Area: 28, Near West Side Redevelopment Area: Canal/Congress TIF Redevelopment Project Area Requested Action: Advertise and Issue a Request For Proposals (RFP) Development Goal: Redevelopment of the Site, beginning with the renovation

and reuse of the Old Post Office Building, is the primary objective. Redevelopment proposals that contemplate a phased development approach must emphasize and account for renovation and reuse of the Old Post Office Building (or a significant portion thereof) in the initial phase. Renovation and reuse of the Annex, or demolition and redevelopment of the Annex portion of the Site, is acceptable concurrently or in subsequent phases.

Target Price: Upon selection, the successful respondent will enter into a

redevelopment agreement with the City, committing to purchase the Site for (a) its fair market value, as determined by verdict or settlement through the use of eminent domain (the “Eminent Domain Fair Market Value”) and (b) the City’s costs, including those incurred by third parties on the City’s behalf, to acquire the Site through the use of eminent domain (the “Eminent Domain Processing Costs”).

Key Dates: Release of RFP: March 16, 2016 Pre-Bid Conference: tentatively scheduled for April 14,

2016 Submission Deadline: June 10, 2016

II. PROPERTY DESCRIPTION Address: 401-439 W. Van Buren Street; 324-430 W. Harrison Street;

and 401- 535 S. Canal Street Location: Bounded by W. Van Buren St. (N), S. Canal St. (W), W.

Harrison St. (S), and the South Branch of the Chicago River (E).

Property Identification Numbers: 17-16-130-001, -002 and -007 (Old Post Office Building) 17-16-130-004 and -006 (Annex) Land Area: Total size: Approximately 484,000 square feet (11.1 acres)

of land; the Old Post Office Building occupies approximately 289,000 sq. ft. of the total Site area.

Current Use: The Old Post Office Building was built in two phases

between 1921 and 1933. The building has been vacant since approximately 1994. Based on a 1998 study of the conditions of various buildings in the area, the Old Post Office Building was categorized as deteriorating, below minimum City Code standards, excessively vacant and suffering from deferred maintenance.

Current Zoning: Waterway Business Planned Development No. 1065, as

amended. Proposed Zoning: DPD will also consider other development proposals that

would require an amendment or other modification to PD 1065, or a new Planned Development, in connection with acquisition of the Site.

Inventory Profile: The City does not currently own the Site but intends to seek

the authority to acquire it by using the City’s right to exercise the power of eminent domain.

III. BACKGROUND The Site is generally bounded by W. Van Buren Street on the north, S. Canal Street on the west, W. Harrison Street on the south and the South Branch of the Chicago River on the east. The Site

is approximately 484,000 square feet (11.1 acres) of land. The Site is improved with the Old Post Office Building, which is a multi-story, approximately 2,500,000 sq. ft. former post office building on parcels consisting of approximately 289,000 sq. ft. (6.6 acres) of land. The Site is also improved with the Annex, which is a multi-story, approximately 250,000 sq. ft. former annex building to the Old Post Office Building on parcels of approximately 195,000 sq. ft. (4.5 acres) of land. The Site is located between Chicago’s Central Area and the Near West Side, which together provide employment to over 676,000 workers as of 2011. Well over half of Chicago’s total workforce is located within a few miles of the Site. The Site is also surrounded by rapidly expanding residential neighborhoods. The Central Area and the Near West Side have experienced the fastest growth in population among all Chicago regions, with the Central Area alone seeing a 56% increase in population between 1990 to 2010. The Site is also at the heart of the city’s transportation system, well-served by both public transit and highways. Within blocks of the Site, access is provided to Chicago’s full network of local, regional and inter-city trains and buses, while Chicago’s highway system is centered at the Jane Byrne Interchange just west of the Site. The neighborhood surrounding the Site holds a mix of office, retail, and transportation uses. Willis Tower is 2 ½ blocks north-east of the Site. Chicago’s Union Station and a new Loop Link terminal are located one block to the north. The new US Post Office, which replaced the Old Post Office, occupies the full block directly south of the subject building, while a substantial retail corridor has emerged along Canal Street and Roosevelt Road a few blocks south of the new Post Office. The mostly residential Printer’s Row neighborhood begins a few blocks east and south of the Site. The Old Post Office Building, designed by Graham, Anderson, Probst, and White, is a key gateway and entrance into the city; people drive underneath it as they enter off the Eisenhower Expressway. The nine-story, 2,500,000 square foot building was constructed in multiple phases between 1921 and 1933. The Old Post Office Building has been vacant since approximately 1995, when the United States Postal Service vacated it to relocate into a new automated facility across Harrison Street. The building was listed on the National Register of Historic Places in 2001 and also noted as historically significant in the Chicago Historic Resources survey and designated with an ‘orange’ rating. However, the Old Post Office building remains challenged with building code violations due to nearly two decades of neglect. The building experienced a fire in 2014 due to ventilation issues from the train tracks below. The United States Postal Service sold the Old Post Office Building in 2009 to International Property Developers North American, Inc. (“IPD”) for $25 million, and in 2013 sold the Annex property to IPD for an additional $14 million. IPD envisioned a $3.5 billion phased mixed-use development that would eventually include three towers and 16 million sq. ft. of residential, retail, entertainment, and office spaces. In July 2013, City Council approved an amendment to the PD# 1065 for an additional $1.5 billion worth of investment, including 2,150 additional

residential units in the Old Post Office Building along with hotel rooms and commercial spaces on adjacent land. Initial occupancy for the first phase of the project was projected for early 2015; however no significant redevelopment work has been completed to date. The initial phase of development was expected to create up to 10,000 permanent and temporary jobs. To date, despite numerous meetings with local representatives the property owner (the last such meeting being held in November 2015) there has been little to no action by the owner to redevelop the site. The Site is one of the City’s most prominent riverfront redevelopment sites. The lack of development progress and need to properly stabilize the Old Post Office building has prompted the Department to take action. The Department intends to acquire the property and then immediately sell it to a qualified development team chosen through the requested RFP issuance. The Department requests the submission of proposals from qualified development teams to purchase and redevelopment the Site. IV. DEVELOPMENT GOALS AND OBJECTIVES The Department of Planning and Development has established goals and objectives for the RFP. The goals are intended to ensure that the chosen submission will be compatible with the City’s objectives of revitalizing valuable urban land, creating new development in sympathetic relationship with the surrounding community, accommodating the needs of the community, and fostering additional new development along Canal Street and in the surrounding community. The development goals are as follows:

• Redevelopment of the Site must include the adaptive reuse of the Old Post Office Building during the initial development phase, with the objective of preserving, rehabilitating and returning the character-defining features of the building.

• The redevelopment plan should also advance the City’s economic development goals by providing active uses that enhance the City’s workforce opportunities, amenities, property values, and tax base

• Redevelopment of the Site must advance the goals stated in the Canal/Congress Redevelopment Project and Plan and align with the planning objectives found in the 2012 Plan for Economic Growth and Jobs, the 2009 Central Area Action Plan, and the 2005 Chicago River Corridor Design Guidelines and Standards.

Development Principles and Preferred Uses: This redevelopment effort presents a unique opportunity to transform the Site into a premier office and mixed-use development.

Affordable Housing: The City’s Affordable Requirements Ordinance (ARO) will apply to the redevelopment of the property.

Development Incentives: The City will consider proposals that request financial assistance in the form of Class L tax assessment reduction. The building is not currently designated a Chicago Landmark, but designation would be encouraged in conjunction with any rehabilitation project in order to combine local preservation incentives with the 20% federal rehabilitation tax credit. Local incentives include the Class L property tax incentive and the ‘Adopt-a-Landmark’ planned development bonus.

Urban Design and Environmental Goals: All proposed uses and design elements should be in context with the character of the surrounding community, and the redevelopment plans should provide, to the greatest extent possible, active street-level spaces that engage pedestrian interest. The successful redevelopment proposal should provide a healthy indoor environments, efficient operating costs, and energy conservation systems that result in Leadership in Energy and Environmental Design (LEED) certification. All proposals should also meet the guidelines of DPD’s Sustainable Policy, including a green roof covering at least 50% of net roof site area for all structures.

Finally, redevelopment of the Site must adhere to the waterway development requirements (pursuant to Section 17-8-0912 of the Municipal Code) through setback, river walk, seawall and open space provisions. The site plan should provide for inviting and usable open space, containing unique features and substantial landscaping between buildings and the entirety of the property’s river walk.

V. TARGET PRICE

Through this RFP, the Department would seek an experienced development team that will commit to purchasing the Site for (a) the Eminent Domain Fair Market Value and (b) the Eminent Domain Processing Costs, as previously defined.

VI. MARKETING OF THE RFP

With the approval of CDC, the Department of Planning and Development will publish a legal notice in one of Chicago’s major daily newspapers announcing the issuance of the RFP and will issue a general news release. The Department has several other options for marketing the property: notification by e-mail to a database of interested parties (developers, attorneys, architects, community development corporations, community organizations, real estate consultants, and financial institutions); placement of a listing on real estate marketing sites such as Loopnet and CoStar; placement of a description of the RFP on DPD’s website; announcement of the RFP by DPD staff at appropriate forums and meetings; promotion of the RFP by the department’s local delegate agencies; and direct contact with parties that have previously expressed interest in the property.

VII. SUBMISSION REQUIREMENTS The RFP will detail all of the submission requirements. Any submission that does not adhere to the requirements can be considered non-responsive. The following information is required of all submission packages: cover letter and proposal summary form; statement of agreement to pay the (a) Eminent Domain Fair Market Value and (b) Eminent Domain Processing Costs; description of the respondent’s organization; description of the respondent’s qualifications, experience, and financial capacity; narrative project overview; plans and drawings of the development concept; financial overview including sources and uses, development budget, pro-forma cash flow or sales projection, evidence of financing, and project completion schedule; affirmative action plan; and other information. Upon selection, the successful respondent will negotiate a redevelopment agreement (“RDA) with the City, committing, among other things, to purchase the Site and to redevelop the Site according to the design and scheduling plans submitted by the respondent in response to this RFP. In connection with the approval of the RDA, the successful respondent will provide the City with an initial Good Faith Deposit of $1,000,000 in the form of a cashier’s check, certified check or letter of credit. Additional terms will be negotiated in the RDA.. VIII. EVALUATION CRITERIA The submissions will be evaluated according to the following criteria: agreement to pay (a) the Site’s Eminent Domain Fair Market Value and (b) the Eminent Domain Processing Costs; the quality of the development team/organization, including the developer’s qualifications, related experience and financial capacity; the conceptual project approach, including the program, site plan, conceptual drawings, and how all of these would achieve the City’s redevelopment goals; the financial qualifications of the development team, and the quality of the financial plan, including sources of equity and lender financing, the development budget plan, the pro-forma cash flow, and evidence of ability to obtain financing; a project completion schedule; the level and quality of the Affirmative Action Plan; and compliance with applicable laws, ordinances and statutes. IX. EVALUATION PROCESS The Department of Planning and Development will review the submittals in accordance with the evaluation criteria. The Department may recommend a shortlist of respondents who may be asked to answer the Department’s questions, provide additional information, or make an oral presentation. The DPD Commissioner may recommend that negotiations be commenced with the selected development team. As a result of these negotiations, the selected proposal may be amended or revised in order to best serve the City’s interests. The selected proposal will be presented to the CPC and the CDC for a recommendation to the City Council. X. CONFORMANCE WITH REDEVELOPMENT AREA PLAN

The acquisition property is located in the Canal/Congress TIF Redevelopment Project Area. The Illinois TIF Act empowers local governments to dispose of property to achieve the goals and objectives of the TIF plan. The goals and objectives of the Canal/Congress TIF plan include:

• Elimination of the influences and manifestations of physical and economic deterioration and obsolescence within the Project Area;

• An increased real estate and sales tax base for the City and other taxing districts; • The attraction of new business, commercial, retail, light industrial, institutional and

residential development and creation of new job opportunities within in the Project Area; • Rehabilitate and enhance historically significant buildings within the Project Area.

XI. COMMUNITY SUPPORT Alderman Daniel Solis endorses the action and has provided a letter of support (see exhibits for copy). XII. RECOMMENDATION The Department of Planning and Development recommends that the CDC approve the advertisement and issuance of the Request for Proposals described in this report.

EXHIBITS

Redevelopment Area Map

Neighborhood Aerial Photographs

Tax Plat or Survey Alderman’s Letter of Support