Illinois

Downtown Rockford redevelopment project hinges on Ziock

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.