Hyatt hotels project in Des Plaines declared dead

Des Plaines city leaders this week hammered the final nail in the coffin of a proposal to build two Hyatt hotels along Mannheim just south of the Jane Addams Tollway.

The city council was unanimous Wednesday night against extending for one year the conditional use permit and variation granted to developer HNI LLC for the hotels project.

The decision went against the city community development committee's earlier recommendation.

Construction of two Hyatt hotels was expected to begin this month. The proposal called for two hotels stacked on top of each other, with a total of 313 rooms, and developing three outlots for restaurants and shops.

The city owns the roughly 5-acre site -- home to Ace car rental and a former TraveLodge -- which it agreed to sell for $2.7 million to Chicago developer Harlem Irving Companies, HNI's parent group.

City officials said it's time to move on since the developer is not ready to move forward with any plans at this time.

"We want to keep our options open for the property," Des Plaines Mayor Marty Moylan said. "If there are other developers we would entertain their ideas.

He said it is a viable location with the coming expansion of O'Hare and the Des Plaines casino, which broke ground last week.

It's the second hotel development to tank in Des Plaines.

Oak Brook-based investor and developer The Harp Group Inc. also backed out of building two Marriott hotels on about four acres north of I-90 along Mannheim Road and Pratt Avenue. The lot is across the street from the 466-room Wyndham O'Hare in Rosemont, which shut Jan. 1.

Harp Group, which gained city approval in 2007 for the roughly $57 million twin-hotels project, let the approval expire in November.

Meanwhile, other developers have been eyeing the city-owned property where the Hyatts were planned, but nothing new has been proposed as yet, 8th Ward Alderwoman Rosemary Argus said.

"We need to do something," Argus said. "We have taken out bonds so we need to have a stream of money coming in."

The property falls within Tax Increment Financing District No. 6, which was created in 2001 to spur redevelopment in the area north and east of Mannheim and Higgins roads.

A TIF district captures increased property tax revenue from redevelopment - money that normally would go to taxing bodies such as schools - which can be used to defray costs of redeveloping the area.

The city borrowed $10.4 million to buy land and for other redevelopment costs, which was to be repaid through TIF district revenues as the area redeveloped.

City officials also restructured the debt last fall because the district was projected to have a $3.2 million deficit by 2012. The refinancing pushed principal and interest payments that were due last year out to 2013, and increases the total cost over the TIF district's lifetime to $15.2 million.

Now, the city is stuck paying the $980,000 debt load on the property unless it can get redevelopment started.

"If we don't have it in the TIF fund we have to go into the general fund," Argus said.

Officials don't know what ultimately may be developed on that site, which was always envisioned as a prime hotel location.

"I would like it to be attractive because it is a very visible piece of property coming into our city," Argus said. "I would like for it to be something striking. We'll have to start being creative."