Lake Zurich board balances costs for proposed condos

Lake Zurich may have to invest more than the village initially bargained for into a multi-story condominium project planned for downtown.

The developer, McCaffery Interests, Inc., of Chicago, is asking the village to pick up the difference in construction cost not covered by a bank loan. That would be above and beyond what the village has already agreed to pay toward infrastructure improvements. The total project development cost is roughly $32 to $35 million under various configurations of the same building, which includes the public and private investment.

The developer's initial proposal called for a five-story building with ground-level retail/restaurant use and 32 condominiums along the stretch of Route 22 across from the lakefront promenade. The project includes a two-story parking garage to the rear and 12 adjacent townhouses. Under that scenario, the village investment would be roughly $5 million for infrastructure improvements and the project cost not covered by the developer.

The village board Monday night had to consider three alternate scenarios with varying cost estimates. They were developed by McCaffery because a housing market slump had stalled the construction of the five-story building, which was set to begin this spring.

Two of the alternatives call for a four-story building with either 24 or 30 condo units, the same retail use and similar parking with slightly fewer spaces. The village would have to invest roughly $8 million in both those scenarios.

A fourth scenario would still involve a five-story building with 40 condo units, which would cost the village $6.2 million.

The return on the village's investment looks better with the original five-story building scenario, village consultant Steve Friedman said.

"The loan facility is not going to cover 100 percent of the development costs," Friedman said.

Friedman said McCaffery has said it does not at this point wish to fill the gap in development cost so the village is being asked to step in.

However, McCaffery accepted to fund its share of the construction cost in a development agreement signed with the village.

"Is this a breach of contract?" village board member Jim Johnson asked.

Village President John Tolomei said that may be a potential litigation issue.

The board was faced with a question Monday night: whether the four-story building scenario was more appealing than the five-story structure, which officials agreed it clearly wasn't if the cost estimates were correct.

"The least cost to the village is going back to the plan that has been with the village for years now," village trustee Craig Taylor said.

Taylor said there is no guarantee that the four-story building will get built any faster than the five-story building.

"Why not just stay the course?" he said.

The reason the board began considering the four-story option was because the developer said the project could get started sooner, Friedman said.

But no matter which option the village chooses to go with, it could likely be next spring before construction begins. The village first must amend its Tax Increment Financing District budget to approve any additional spending on redevelopment. The village has already spent $29.3 million on redevelopment and has a few hundred thousand left.

The village board Monday night agreed to start that process of amending the TIF budget, even though exact numbers have not been finalized.