The city wants to sell the former Michael Reese Hospital property to developers for at least $96.9 million, but taxpayer costs for environmental cleanup and public works needed for the multi-year project could cost almost as much.
The sale, expected to be voted on Tuesday by the Community Development Commission, includes a pledge to repay developers up to $60 million to extend city streets into the 48-acre site near 31st Street and Lake Park Avenue. A report prepared for the commission said the city will seek federal infrastructure money to help pay for the work.
Another outlay is needed to remove hazardous waste left by a radium processing plant that was on the northern end of the property more than 100 years ago. City planners have estimated that the work will cost $31 million, much of it from a tax-increment financing district for the Bronzeville area.
Despite the costs, officials said the sale will end the property’s long-term financial drain on the city.
“The redevelopment of this large parcel will bring a vacant, tax-exempt site back into use. The project will serve as a catalyst for continuing development along the south side and south lakefront,” said a report from the city’s Planning Department. “Area residents will have access to more jobs, cultural opportunities, retail and entertainment options that have long been lacking in this area.”
An investment team led by Farpoint Development wants to build nearly 8 million square feet covering residential and commercial uses. The development is called Bronzeville Lakefront and has been thoroughly vetted by community groups.
The first phase of the roughly $4 billion project is to include a research facility operated by Israel’s highly regarded Sheba Medical Center, plus senior housing and a community welcoming center on the southern portion of the property.
Plans ultimately call for 4,800 residential units, with 20% set aside at reduced rents for people with lower incomes. The developers also are required to pay $25 million toward the expansion of nearby schools once they’ve completed 3 million square feet of construction.
Scott Goodman, founding principal of Farpoint, said that despite the public costs, the project will bring substantial benefits to the city and nearby residents. “This is a huge opportunity and responsibility,” he said. Citing the involvement of the medical center, he said, “We will be building the healthy community of the future and creating jobs where there have been none.”
The city in February approved the broad zoning rules for what can be built on the site, which is just south of McCormick Place. Tuesday’s review by the Community Development Commission covers only the terms of the property sale.
Under former Mayor Richard M. Daley, the city paid $91 million for the property in 2009. It was supposed to serve as an athletes’ village in the city’s unsuccessful bid for the 2016 Summer Olympics. Taxpayers have paid annual interest on the sale ever since.
Goodman said he and co-investors are paying a fair market rate for the property, considering the public investment the project requires. The developers have said the project could account for 30,000 full-time jobs over the next 20 years,
The city report said the property has many challenges to its potential. Roads have to be built and access to the lake is poor, the report said. It noted that the environmental cleanup must be complete before construction can begin.
Terms call for the developers to deposit $20 million toward the sale price, paying off the balance as they are ready to start on later phases. After the radium cleanup is finished, the sales price for unpurchased land will increase by 2% per year, according to the agreement.
Partners in the project include Loop Capital Management, McLaurin Development Partners, Draper & Kramer, Chicago Neighborhood Initiatives and Bronzeville Community Development Partnership. The team calls itself GRIT Chicago.