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PARK RIDGE, IL-PRC Partners, LLC is aiming for an 11% internal rate of return on its Uptown mixed-use redevelopment project. If it can top that, the development team will split profits above that threshold with the city.
Officials in this suburb just northwest of Chicago will get 40% of revenue above that 11% internal rate of return. However, odds of splitting any windfalls hinge on the pace of the development of the 189 multifamily units and up to 85,000 sf of retail space, as well as construction costs, a consultant tells city officials.
"Construction costs have been going up far greater than the rate of inflation," says Stephen B. Friedman, the city's adviser for the $90-million redevelopment of the 5.8-acre site at Northwest Highway and Touhy Avenue. Steel costs are rising with only two major US suppliers, and growth in Asia is fueling demand for labor and materials, he adds.
On the other hand, brisk sales of the first phase of the development, which was entirely residential, should help boost returns, Friedman says.
PRC Partners, which includes Mid-America Asset Management, Edward R. James Partners and Valenti Builders, is paying the city $9.5 million for the land. The project is expected to generate $14.3 million in sales tax revenue to the city throughout 22 years as well as $45 million in property tax revenue. In exchange, the city is spending more than $17 million on infrastructure improvements.
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