By Brian Leaf, Rockford Register Star, Apr. 2, 2014
A downtown developer has acquired the vacant Hanley building and is ready to sink $10 million into it if the City Council approves a proposal for a $52.7 million downtown hotel.
Justin Fern of Urban Equity Properties said the Hanley project hinges on the redevelopment of the Ziock/Amerock building, which Wisconsin-based Gorman & Co. wants to turn into a 13-story hotel and convention center.
“If Ziock dies, I will possibly put this on hold for five or 10 years,” Fern said. “We need the Ziock development.”
Fern said that failure by the city to approve a deal with Gorman would have a chilling effect on other downtown projects that total tens of millions of dollars. He sees the Ziock project as the key to rejuvenating the central city.
“This has got me so worked up,” Fern said. “I can’t believe some of the things we’re trying to make this developer do. And he wants to invest $52 million?”
The city’s planning and development committee voted 3-1 earlier this week to approve a development deal with Gorman. The deal would cost the city $18.6 million for parking and infrastructure improvements and millions more in tax incentives, but it would also bring a long-sought hotel to the central city, spurring tourism and other business development.
Gorman’s development agreement will come before the full council on Monday, April 7, 2014.
Fern isn’t making any current plans for the five-story, 50,000-square-foot Hanley building — built in 1901 a block away from Ziock — but he said that retail and restaurant businesses could work well on the ground floor, and upper floors could be filled with loft offices and luxury loft apartments.
Winnebago County sold Hanley to Yenom Inc. of Rockford for $58,956 in delinquent taxes.
Yenom Inc. then signed the deed over to Hanley Lofts LLC in a tax sale on March 20, 2014, said Margie Mullins, Winnebago County clerk.
“A lot of the tax buyers will buy the delinquent taxes, and then they assign the tax deed to another company,” Mullins said. According to the Illinois Secretary of State’s office, Hanley Lofts LLC is managed by Fern.
The Hanley building was condemned by the city last year for code violations. According to hearing records, the city sought $60,000 in fines from its owner, The Grierson Group LLC of Genoa, for failing to bring the building into compliance in a timely manner. It was then sold at a steep discount.
Several years ago, former owners listed the Hanley building for $2 million. Last year, Urban Equity Properties was ready to buy the property for $355,000 after winning an auction, but Fern walked away from the deal. He is currently under a settlement with The Grierson Group and said that he can’t discuss what scuttled the purchase of a building.
A walk-through with the developer on Tuesday, April 1, 2014, revealed five stories of squalor — broken windows, dead pigeons, bird droppings, water-damaged floors and ceilings, and equipment and materials from past businesses — but all was a mere distraction for Fern, who focused on the building’s structure.
“This is a great carcass,” Fern said to Eric Sallinger, his project manager. “Amazing.”
The market for downtown real estate has grown more active in the past year because companies that rehab historic buildings can get up to 45 percent of their construction costs covered by state and federal tax credits. Developers can then offset their costs by selling the tax credits to investors who want to lower their tax liabilities. State tax credits expire in 2016, so developers that want to take advantage say that they need to get projects going soon. Urban Equity Properties has been among the busiest players.
Fern’s company has two buildings under construction in the 300 and 400 blocks of East State Street that will house shops, restaurants and 16 loft apartments. Fern said that he’ll complete those projects no matter what happens with the Gorman proposal.
But plans for the Hanley project, as well as a $1 million loft office and retail project at 134 N. First St. and a $3.5 million residential and commercial project at 327 W. Jefferson St., are on hold until the Ziock project is given the go-ahead.
“They just need to approve it,” he said.