Developer seeks tax incentive to build speculative warehouse in Northbrook

Appease a developer seeking favors on a speculative proposal, or allow a dormant property to stay dormant.

The Village of Northbrook board of trustees debated that question Tuesday night.

Panattoni Development Corporation, headquartered in Irvine, California, seeks to raze a 284,000 square-foot building in an industrial area at 4000 Commercial Ave., along I-294, and build a 447,583 square-foot "speculative facility for future industrial users," as Northbrook Development and Planning Services Deputy Director Justin Chu's presentation stated.

Built in 1976 on 26.54 acres, the building initially was intended mainly for office space. Now only Walgreens remains, on 30,000 square feet, and indicated it would leave when the property was purchased.

It's been on the market five years and, as Chu pointed out, in today's economy office space is not in high demand.

"According to our monthly reports, office uses in the village are the most vacant, about 16 percent vacancy," he said.

Trustee Bob Israel affirmed that "this has been a difficult property to get rid of."

In making a $40 million investment into the space, Panattoni seeks Cook County 6b property tax incentives, which reduce the overall property tax bill over a 12-year period for industrial and warehouse buildings. However, Panattoni desires several caveats.

First, 6b is typically used for the rehabilitation and occupancy of a building vacant for at least two years, not for new construction. And there are no planned tenants.

Northbrook's 6b program does not allow property tax appeals. Panattoni requests that standard be waived.

As well, Panattoni seeks relief from Northbrook policy barring application for an extension of 6b incentives on the development.

Not a popular request.

"It should be able to financially meet its goals without having to do that additional 12 years, as our other 6b developments have," Israel said later in the discussion.

According to estimates in Chu's presentation, with the 6b incentive the new building would contribute $17.2 million in property taxes over the 12 years; left alone, that amount would be nearly $11.95 million.

The estimated taxes paid if Panattoni occupied the building without the 6b designation would be $37.4 million.

That would be unlikely to happen.

"I think it might be a swing and a miss ... to not try to work with a developer who is going to knock down an obsolete, 275,000 square-foot building and put in a modern building that can be used for years and years to come," Northbrook Village President Kathryn Ciesla said.

Trustees seemed split on the proposal.

Muriel Collison wanted the board to be consistent in its 6b considerations, did not support an extension of the incentive and, due to its speculative nature, didn't "know enough about it to support it at this time," she said.

Heather Ross, with Israel a leader in the village's recently created Climate Action Plan, sought more sustainability features than the LED lighting the developer proposed.

Still, she said she would "believe in the developer."

Johanna Hebl thought village 6b requirements could be varied in the case of a $40 million proposal.

"I think the investment in our community is huge," she said. "I guess I'm playing the long game here in that in 12 years the taxes will be significantly higher."

Dan Pepoon also believed the developer should adhere to "each and every one" of the CAP commitments. Though he desired to work with Panattoni, he was concerned with the project's lack of specific usage and tenants.

Echoing one of Hebl's points, Pepoon stated his distaste of 6b reapplication unless "they could put another tens of millions of dollars in it."

Though she said there are areas of concern, Trustee Joy Ebhomielen believed this to be "a great opportunity."

Capping the discussion, Ciesla acknowledged that Northbrook's lengthy review process for proposals and "antiquated" guidelines has discouraged move-ins, who then look elsewhere.

She noted that this proposal would help diversity the village's tax base by bringing in "the one industry that's growing - shipping and online ordering."

She believed allowing this business, or anyone, to appeal Cook County tax rates was appropriate, and appreciated a suitor offering a $40 million investment on an essentially vacant space.

"I would encourage - strongly encourage - the applicant to continue the process," the village president said.

"I'd like to simultaneously evaluate our criteria to make sure that we communicate to the public that we are a board, we are a village, that's business-friendly, that wants businesses to come in and invest in our community. I really want that to happen."