Client: The Prime Group

The Prime Group retained Gruen Gruen + Associates (GG+A) to complete an analysis of the proposed adaptive reuse of office space into 280 apartment units and 6,900 square feet of ground floor space at 208 South La Salle Street and 349 apartment units and 6,000 square feet of ground floor commercial space at 111 West Monroe Street in Chicago.

The Prime Group proposes to set aside 30 percent of the apartment units for households with annual incomes of 40 percent to 80 percent of Area Median Income (“AMI”) with an overall average of 60 percent of AMI.

GG+A directed the analysis to identify whether TIF incentives are needed and if so, to quantify the amount of incentive needed to bridge a feasibility gap given the use of other financing sources to reduce the need for TIF incentives. In addition, GG+A estimated the economic and fiscal impacts associated with the construction and occupancy of the apartment units and commercial space.

To evaluate whether TIF incentives are needed, GG+A estimated the equity and debt funding that could be supported by the forecast net cash flow anticipated to result from the development, leasing, and eventual sale of the proposed adaptive reuse developments without TIF incentives. The debt and equity capital that can be expected to be raised and generate an appropriate return and repayment was compared to the estimated total acquisition and development costs. The amount of the shortfall between the total costs feasibly supported by private capital and the amount that would need to be bridged by the sale of tax credits and TIF incentives was identified.

Based on the estimated property values at build-out and stabilized occupancy, the property tax revenues the adaptive reuse projects would generate for taxing entities were estimated. In addition, the one-time construction economic impacts and ongoing economic impacts from the spending of residents of the units and management of the properties were estimated.

GG+A prepared extensive reports summarizing the work completed, results, and conclusions. The reports were included in submittals responding to a Request for Proposals issued by the city of Chicago offering incentives for the conversion of obsolete office space buildings to residential units including affordable housing.