Glen Ellyn considering $1.5 million tax incentive for shopping center owner

By renovating a long-vacant Dominick's store, the owner of a Glen Ellyn shopping center hopes to entice a grocer to its anchor spot.

Phillips Edison & Company also has proposed a major redesign of the Baker Hill shopping center, just northeast of Roosevelt Road and Route 53. The real estate company bought the center in 2011.

To fill a funding gap in the project, the company is asking for a financial incentive from the village. Phillips Edison initially sought a $2 million deal, but trustees rejected that request.

Village staffers are now recommending an agreement that would allow the landlord to recoup up to $1.5 million in sales taxes generated by a new Pete's Fresh Market that could open in the dormant space once occupied by Dominick's.

Village trustees will informally discuss the proposed incentive during a board workshop Monday night. Developers are not expected to attend because of a prior conflict.

The village would not provide the money upfront but instead rebate a portion of the sales taxes collected from the new grocery store.

The rebate agreement would expire in 10 years - or until developers get back up to $1.5 million in sales tax revenue, whichever occurs first.

The village would receive a base amount of $75,000 in sales taxes generated by the grocery store. The remaining sales tax revenue would be shared, with the village keeping 50 percent and rebating 50 percent to the shopping center owner over the life of the agreement.

The grocery store is projected to make $32 million in sales the first year of business, according to village documents.

"This will not have any impact on our current budget because they would only get the incentive if they meet these projections," Village Manager Mark Franz said Friday. "And our analysis shows that over the life of the 10 years, the village is set to make somewhere in the $2.5 million range to their $1.5 million. That's the benefit of doing a performance-based incentive."

If the board later approves the incentive, Phillips Edison could invest just more than $8 million into the shopping center improvements. As the tenant, Pete's Fresh Market also would kick in about $4.8 million toward converting the Dominick's store. Both parties have reached a lease agreement.

To accommodate a Pete's store in the 72,397-square-foot space, the landlord would pay for interior demolition, a new facade, bathrooms, flooring, lighting, fire sprinkler systems, outdoor seating, consultant costs and other infrastructure work, a village memo to board states.

Elsewhere in Baker Hill, Phillips Edison plans to add new lighting to the 135,000-square-foot shopping center, install signs and bike racks, remodel facades to tie in with the Pete's storefront, repair and re-stripe the parking lot and beautify landscaping.·

Most of the costs would be spent in the next 18 months, but certain improvements to the center would finish by 2020, Franz said.

The build-out of the Pete's store would take roughly 15 months. Pete's is working to fast-track the construction in order to open by about October 2018, Franz said. If Pete's is delayed, the opening would be pushed to spring 2019.

The family-owned chain founded by Jimmy Dremonas and his brothers also is anticipated to expand to a Wheaton shopping center.

Dominick's parent company, Safeway, shuttered stores across the region in 2013. But Safeway still continued to pay rent, seemingly leaving property owners with little incentive to attract new tenants.

Safeway merged in 2015 with Albertsons, the parent company of the Jewel-Osco grocery chain. Alex Demos, the former Glen Ellyn village president, joined other suburban mayors about a year ago in calling on Albertsons to stop extending leases on former Dominick's stores.

Amid that public pressure, Albertson's terminated its lease on the Baker Hill space earlier this summer.

Franz said the village has been working with the property owner for years to find a high-quality grocery store for a prominent spot in a gateway into Glen Ellyn.

"We've got a pretty challenging retail environment out there," he said. "Finding somebody to fill a 72,000-square-foot space is not easy. There's less players, so being able to do this and fill that space not only helps the Baker Hill shopping center and the tenants currently there, but helps the whole corridor."