HomeMy WebLinkAboutRes 26-25 09/16/2025 Designating An Area As Blighted And In Need Of Reneweal For The Real Property Commonly Known As 200. E. Rand Road, Mount Prospect, Illinois 60056RESOLUTION NO. 26-25
A RESOLUTION DESIGNATING AN AREA AS BLIGHTED AND
IN NEED OF RENEWAL FOR THE REAL PROPERTY COMMONLY
KNOWN AS 200 E. RAND ROAD, MOUNT PROSPECT, ILLINOIS 60056
P I N s: 03-34-200-061 /-062
WHEREAS, the Village of Mount Prospect, Cook County, Illinois (the "Village") is a home rule
municipality pursuant to Section 6(a), Article VII of the 1970 Constitution of the State of
Illinois, and as such may exercise any power and perform any function pertaining to its
government and affairs ("Home Rule Powers"); and
WHEREAS, the Cook County Board of Commissioners has amended the Cook County Real
Property Classification Ordinance to provide real estate tax incentives to property owners
who build, rehabilitate, enhance and occupy property which is located within Cook County
and which is used for industrial and/or commercial purposes; and
WHEREAS, the Village, consistent with the Cook County Real Property Classification
Ordinance, as amended, wishes to induce industrial and commercial enterprises to locate
and expand in the Village by offering financial incentives in the form of property tax relief;
and
WHEREAS, RF,],,T 2Q,0,LLC,.(the "Applicant") is the owner/contract purchaser of the property
Located at 200 E. Rand Road, Mount Prospect, Illinois 60056 delineated by Property Index
Numbers 03-34-200-061/-062, and legally described on Exhibit "A" attached hereto and
made a part hereof; (the "Redevelopment Project Area"); and
WHEREAS, the Applicant has submitted to the Village a Cook County Class 7b Property Tax
Incentive Eligibility Application concerning the Redevelopment Project Area (the
"Application"); and
WHEREAS, the Redevelopment Project Area, and any improvements located thereon, are
currently vacant and unused; and
WHEREAS, the Village has evaluated the Redevelopment Project Area to determine if the
area constitutes a "blighted area" under the laws of the State of Illinois; and
WHEREAS, both the Illinois Tax Increment Allocation Redevelopment Act, 65 ILCS 5/11-
74.4-1 et seq. ("TIF Act"), and the Commercial Renewal and Redevelopment Areas Act, 65
ILCS 5/11-74.2-2-1 et seq. ("Renewal Act"), provide guidance and criteria for determining
whether an area is blighted; and
WHEREAS, pursuant to the TIF Act, a blighted area includes the presence of at least five of
the following factors: (A) dilapidation; (B) obsolescence; (C) deterioration; (D) presence of
structures below minimum code standards; (E) illegal use of minimum structures; (F)
excessive vacancies; (G) lack of ventilation, light or sanitary facilities; (H) inadequate
utilities; (1) excessive land coverage and overcrowding of structures and community
facilities; (J) deleterious land use or layout; (K) Environmental clean-up; (L) lack of
community planning and (M) declination/stagnation of the total equalized assessed value
of the proposed redevelopment project area has declined for 3 of the last 5 calendar years
(65 ILCS 5/11-74.4- 3(a)(1)); and
WHEREAS, the corporate authorities have reviewed the Blight Analysis prepared by SPM,
and attached hereto as Exhibit "B" (the "Blight Analysis"); and
WHEREAS, the Village finds that at least six (6) of the of the TIF Act blight factors are present
within the Redevelopment Project Area including: (1) obsolescence; (2) deterioration; (3)
excessive vacancies; (4) deleterious land -use or layout; (5) excessive land coverage /
overcrowding; and (6) the declination/stagnation of the equalized assessed value, as
specifically set forth in the Blight Analysis; and
WHEREAS, the Village finds that because the Redevelopment Project Area contains at least
five or more of the factors used to establish blight under the TIF Act, the Redevelopment
Project Area is found to be a blighted area; and
WHEREAS, the Village also finds that the Redevelopment Project Area also constitutes a
commercial blight area or blight area under the Renewal Act; and
WHEREAS, the Village finds that unless corrected, the blighted condition of the
Redevelopment Project Area will persist and continue to delay any future economic
development within the area; and
WHEREAS, the Village finds that the Redevelopment Project Area is therefore in need of
redevelopment and renewal to prevent the spread of blight.
NOW, THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND BOARD OF TRUSTEES
OF THE VILLAGE OF MOUNT PROSPECT, COOK COUNTY, ILLINOIS, A HOME RULE
MUNICIPALITIY:
CTgC._..I., The recitals set forth above are incorporated herein and made a part hereof.
SECTION Td That commercial buildings and improvements within the Redevelopment
Project Area are detrimental to the public safety, health, or welfare because of a presence,
as documented, of the following TIF Act and Renewal Act factors: (1) obsolescence; (2)
deterioration; (3) excessive vacancies; (4) deleterious land -use or layout; (5) excessive land
coverage / overcrowding; and (6) the declination/stagnation of the equalized assessed
value.
SECTION THREE: Based on the findings set forth in Section 2 of this Resolution, the Village
Council finds that:
A. The Redevelopment Project Area is a blighted area;
B. Unless corrected, the blighted condition of the Redevelopment Project Area
will persist and continue to delay anyfuture economic development within the
area; and
C. The Redevelopment Project Area is therefore in need of redevelopment and
renewal to prevent the spread of blight.
SECTION FOUR: Upon approval and execution of this Resolution, the Village Clerk shall
prepare certified copies of this Resolution for purposes of filing with the Office of the Cook
County Assessor & Board of Commissioners.
.C_TIC,i, FIVE; If any section, paragraph, clause or provision of this Resolution shall be held
invalid, the invalidity thereof shall not affect any of the other provisions of this Resolution.
SJECTION-StX: All resolutions in conflict herewith are hereby repealed to the extent of such
conflict.
SECTION .EVE_ N This Resolution shall be in full force and effect from and after its passage
and approval as provided by law.
AYES: Dante, DiPrima, Gens, Grossi, Matuszak, Saccotelli
NAYS: None
ABSENT: None
PASSED AND APPROVED this 16 day of September, 2025
Paul Wm. Hoefert
Village Mayor
ATTEST:
kp.y
Karen Agoranos
Village Clerk
Exhibit "A
Legal Description
PAiCL.1:
THE WEST 210 FEET OF THE EAST 490 FEET OF THE NORTH 300 FEET OF THE
NORTHWEST'/a OFTHE NORTHEAST'/a OF SECTION 34, TOWNSHIP 42 NORTH,
RANGE 11 EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOI(COUNTY, ILLINOIS.
PARU12.,
THAT PART LYING NORTH OF RAND ROAD OF THE WEST 210 FEET OF THE EAST 490 FEET
OFTHE NORTHWEST'/a OFTHE NORTHEAST '/a OF SECTION 34, TOWNSHIP 42 NORTH,
RANGE 11 EAST OFTHE THIRD PRINCIPAL MERIDIAN, (EXCEPTTHE NORTH 300 FEET), IN
COOK COUNTY, ILLINOIS.
Common Address: 200 E. Rand Road, Mount Prospect, Illinois 60056
PINs: 03-34-200-061 /-062
Exhi-bit ", ."
Might Analysis
MEMORANDUM
Date: August 28, 2025
To: Brian P. Liston, Esq., and Peter Tsantilis, Esq.
The Law Offices of Liston & Tsantilis, P.C.
From: Peter Tsiolis, Aric Swaney - Strategic Project Management
Subject: 200 E. Rand Road
Mount Prospect, IL — Class 7(b)
THE NEED FOR A CLASS 7(B) INCENTIVE TO ENSURE FEASIBILITY FOR THE
REDEVELOPMENT OF THE PROPERTY
LOCATED AT 200 E. RAND ROAD
MOUNT PROSPECT, IL 60056
To
BRIAN P. LISTON, ESQ., AND PETER TSANTILIS, ESQ.
THE LAW OFFICES OF LISTON & TSANTILIS, P.C.
From
STRATEGIC PROJECT MANAGEMENT, INC..
August 28, 2025
TABLE OF CONTENTS
Pau
INTRODUCTION........... ........,. ........ ........ ......... ......... ........ ........ 1
BLIGHTCRITERIA ................................. .I........., .,.,.., ....... ........................... 1
FINANCIAL FEASIBILITY ANALYSIS..................................................................................... 5
Proposed Redevelopment Project............................................................................................. 5
Approach to Determine Whether Class 7(b) Tax Incentive is Needed .................................... 6
Projected Redevelopment Costs............................................................................................... 7
PropertyTax Projections...................................................................................................................8
Projection of Hotel Building Cash Flow and Internal Rate of Return on Investment— ...............9
CONCLUSION......... ............ ........ . ...... ......... ........ ....15
INTRODUCTION
The issue of whether the redevelopment of the property commonly known as 200 E, Rand Rd.,
Mount Prospect, IL, or more specifically identified by PINs 03-34-200-061/062 is feasible without
a Class 7(b) incentive is the focus of this analysis. In order to draw a conclusion, Strategic Project
Management utilized a methodology that encompasses simulating real estate tax projections and
redevelopment costs, IRR and ROI, as well as other factors including community impact. In
addition, we rely on certain assumptions as concluded by the Board of Trustees of the Village of
Mount Prospect in addition to our own review of their conclusions and our field reports.
Prior to delving into the analysis of this specific project (as will be fully described below), we addressed
the issue of whether the subject property is within an area that meets the blight criteria as defined in
the Illinois Tax Increment Allocation Redevelopment Act (65 ILCS 5/11-74/4-1 et sea.) (the "TIF
Act"). Our examination of both the issue of blight and whether this project is feasible without a Class
7(b) concludes the subject property is within a blighted area and the project would not be economically
feasible without the Class 7(b) incentive.
BLIGHT CRITERIA
As a point of reference, we found ample evidence as will be presented below of blight and strongly
recommend the Mayor and Village Board and Cook County determine that the property, site, or
area is deemed a redevelopment priority by the Village, and that it satisfies the designation
requirement to demonstrate that the area is "in need of commercial development" and thus
blighted pursuant to both the Illinois Tax Increment Allocation Redevelopment Act, 65 ILCS
5/11-74.4-1 et seq. ("TIF Act"), and the Commercial Renewal and Redevelopment Areas Act, 65
ILCS 5/11-74.2-2-1 et seq. ("Renewal Act") in compliance with the ordinance required to be
eligible for a Class 7(b) Incentive. Our analysis examined the same criteria as set forth in the
Illinois Tax Increment Allocation Redevelopment Act (65 ILCS 5/11-74.4-1 et seq.) (the "TIF
Act") in determining where the subject parcel meets the designation of blighted area, and we
strongly recommend that conclusion be reached by the President and Village Board and Cook
County.
In determining whether an area qualifies as blighted under the TIF Act, a project area must be, on and
after November 1, 1999, "an improved or vacant area within the boundaries of a redevelopment project
area located within the territorial limits of the municipality where, if improved, industrial, commercial,
and residential buildings or improvements are detrimental to the public safety, health, or welfare
because of a combination of 5 or more of the following factors, each of which is (1) present, with that
presence documented, to a meaningful extent so that a municipality may reasonably find that the factor
is clearly present within the intent of the Act and (ii) reasonably distributed throughout the improved
Page
part of the redevelopment project area:"
(A) Dilapidation: An advanced state of disrepair or neglect of necessary repairs to the primary
structural components of buildings or improvements in such a combination that a documented building
condition analysis determines that major repair is required, or the defects are so serious and so
extensive that the buildings must be removed.
(B) Obsolescence: The condition or process of falling into disuse. Structures become ill -suited for
the original use.
(C) Deterioration: With respect to buildings, defects including, but not limited to, major defects in
the secondary building components such as doors, windows, porches, gutters and downspouts and
fascia. With respect to surface improvements, that the condition of roadways, alleys, curbs, gutters,
sidewalks, off-street parking, and surface storage areas evidence deterioration, including, but not
limited to, surface cracking, crumbling, potholes, depressions, loose paving material and weeds
protruding through paved surfaces.
(D) Presence of Structures Below Minimum Code Standards: All structures that do not meet the
standards of zoning, subdivision, building, fire, and other governmental codes applicable to property,
but not including housing and property maintenance codes.
(E) Illegal Use of Individual Structures: The use of structures in violation of applicable federal,
State, or local laws, exclusive of those applicable to the presence of structures below minimum code
standards.
(F) Excessive Vacancies: The presence of buildings that are unoccupied or under-utilized and that
represent an adverse influence on the area because of the frequency, extent, or duration of the
vacancies.
(G) Lack of Ventilation, Light, or Sanitary Facilities: The absence of adequate ventilation for light
or air circulation in spaces or rooms without windows, or that require the removal of dust, odor, gas,
smoke, or other noxious airborne materials. Inadequate natural light and ventilation means the absence
of skylights or windows for interior spaces or rooms and improper window sizes and amounts by room
area to window area ratios. Inadequate sanitary facilities refer to the absence or inadequacy of garbage
storage and enclosure, bathroom facilities, hot water and kitchens and structural inadequacies
preventing ingress and egress to and from all rooms and units within a building.
(H) Inadequate Utilities: Underground and overhead utilities such as storm sewers and storm
drainage, sanitary sewers, water lines and gas, telephone and electrical services that are shown to be
inadequate. Inadequate utilities are those that are: (i) of insufficient capacity to serve the uses in the
redevelopment project area; (ii) deteriorated, antiquated, obsolete or in disrepair; or (iii) lacking within
the redevelopment project area.
(I) Excessive Land Coverage and Overcrowding of Structures and Community Facilities: The
Page 2
over -intensive use of property and the crowding of buildings and accessory facilities onto a site.
Examples of problem conditions warranting the designation of an area as one exhibiting excessive
land coverage are: (i) the presence of buildings either improperly situated on parcels or located on
parcels of inadequate size and shape in relation to present-day standards of development for health
and safety and (ii) the presence of multiple buildings on a single parcel. For there to be a finding of
excessive land coverage, these parcels must exhibit one or more of the following conditions:
insufficient provision for light and air within or around buildings, increased threat of spread of fire
due to the close proximity of buildings, lack of adequate or proper access to a public right-of-way,
lack of reasonably required off-street parking or inadequate provision for loading service.
(J) Deleterious Land -Use or Layout: The existence of incompatible land -use relationships,
buildings occupied by inappropriate mixed -uses or uses considered to be noxious, offensive, or
unsuitable for the surrounding area.
(K) Environmental Clean -Up: The proposed redevelopment project area has incurred Illinois
Environmental Protection Agency or United States Environmental Protection Agency remediation
costs for, or a study conducted by an independent consultant recognized as having expertise in
environmental remediation has determined a need for the clean-up of hazardous waste, hazardous
substances or underground storage tanks required by State or federal law, provided that the remediation
costs constitute a material impediment to the development or redevelopment of the redevelopment
project area.
(L) Lack of Community Planning: The proposed redevelopment project area was developed prior
to or without the benefit or guidance of a community plan. This means that the development occurred
prior to the adoption by the municipality of a comprehensive or other community plan or that the plan
was not followed at the time of the area's development. This factor must be documented by evidence
of adverse or incompatible land -use relationships, inadequate street layout, improper subdivision,
parcels of inadequate shape and size to meet contemporary development standards or other evidence
demonstrating an absence of effective community planning.
(M) The total equalized assessed value of the proposed redevelopment project area has declined for
three (3) of the last five (5) calendar years prior to the year in which the redevelopment project area is
designated, or is increasing at an annual rate that is less than the balance of the municipality for three
(3) of the last five (5) calendar years, for which information is available, or is increasing at an annual
rate that is less than the Consumer Price Index for All Urban Consumers published by the United
States Department of Labor or successor agency for three (3) of the last five (5) calendar years prior
to the year in which the redevelopment project area is designated.
As previously stated, we found ample evidence of blight and strongly recommend the Mayor and
Village Board and Cook County find that the parcel here in question (please see Exhibit A
photographs) is a blighted area. In this instance, following an exterior survey of the condition and use
of the area; field survey of conditions of roads, sidewalks, parking areas, lighting, landscaping, general
Page 13
property maintenance; analysis of existing structures and development plans for future structures; and
research of relevant government records, we again strongly recommend that the Mayor and Village
Board and Cook County should find the area is a "blighted area" and designate it as such due to the
following six factors (only five are required, but we find that there are at minimum six here):
• Obsolescence: Deterioration, insufficient drainage, and general inadequate infrastructure here are
evidence of obsolescence. Buildings are old and were in existence prior to most modern codes even
when renovations were done in 2008, and for this reason, these older structures are not only
functionally obsolescent, but economically obsolescent as well given the cost of such improvements
versus their likely economic value.
• Deterioration of Structures and Site improvements: deterioration was observed on the majority of
the parcel. Deterioration in surface improvements was pervasive. Such deterioration included cracking
and crumbling surfaces and potholes. The high degree of deterioration observable on these
improvements contributes to an adverse aesthetic impact on the area. Inadequate maintenance and
repair of surface areas encourage an environment that is both unsafe for pedestrians and drivers and
encourages vandalism.
• Presence of Structures Below Minimum Code Standards: During the vacancy, the property has not
adequately been kept to modern codes. In fact, in 2023 violations included wood fences on the east
side of the property with multiple broken areas and broken slats, multiple windows broken on the
exterior of the property, multiple areas of the exterior containing rubbish and garbage around the
property, and the structure was found to be unsafe due to fire sprinkler system being out of service.
The village deemed it "unfit for occupancy.
• Excessive vacancies: the hotel building has been vacant for almost six years.
• Inadequate Utilities: The combination of the overall age, deterioration, and the apparent lack of on -
site detention or retention of storm water qualify as inadequate. Because of the 1971 construction date,
sections of the parcel's water, storm and sanitary sewer systems are at or near the end of their useful
lives and are in need of upgrade and/or replacement due to both existing inadequacies and due to lack
of capacity to serve future redevelopment needs.
• Lack of Community Planning: The lack of an adequate Comprehensive Plan for this area in 1971 did
not significantly guide development in the area, and the 1976 Comprehensive Plan did not add much
beyond zoning. While improvements may have taken place over the years, they were implemented
with minimal to no guidance from the 2007 Comprehensive Plan. The Village has had some
constructive input into area development, but the 2017 Rand Road Corridor Plan and Comprehensive
Plans lack guidance into development in the post -pandemic world.
1 Richard Mayer, "Mount Prospect Fines Vacant Hotel Owners $20,000," Journal & Topics, 2023,
https://www.journal-topics.com/articles/mount-prospect-fines-vacant-hotel-owners-20000/
Page 14
FINANCIAL FEASIBILITY ANALYSIS FOR THE REDEVELOPMENT OF 200 E. RAND
RD AND REDEVELOPMENT OF A HOTEL ON THE PROPERTY
The data and analysis in this section is provided by REIT 200 LLC (the "Applicant"). The
information related to historical, current, and future real estate taxes is presented in this report by
Strategic Project Management based on Cook County tax records. The future projections are
derived by SPM based on historical trends and assumptions.
Proposed Redevelopment Project
The Subject Property currently consists of a vacant, approximately 79,828 square foot, three (3) story,
former Holiday Inn Hotel, sited on approximately 128,332 square feet of land. The property currently
features 136 rooms, a fitness center, indoor pool/spa, meeting space, business center, guest laundry and a
restaurant space. The proximity to the city of Chicago, O'Hare International Airport, and regional
transportation networks ensure the site's continued economic growth. The property's prime location near
a bustling mall and upscale retail stores enhances its appeal, making it an ideal spot to attract a high -quality
restaurant tenant.
Should the Class 7b Tax Incentive be granted, the Applicant plans to invest over $9,000,000 to purchase,
improve and build out the renovated space for use as an IHG branded Staybridge Suite Extended Stay
Hotel. The proposed Hotel would be an all -suite property that targets upscale corporate travelers. The
Applicant intends to re -open the restaurant and bar in at the site, as well as a gift shop for small items and
snacks. As such, the site is expected to generate significant sales tax revenue, of which the Village will
receive a portion. As part of these improvements, the Applicant intends to renovate/improve all aspects of
the site including, but not limited to the guestrooms, lobby, corridors, fitness center, swimming pool, and
restaurant.
Once improvements are finished, the site will operate at a Staybridge Suites Extended Stay Hotel, which,
according to Staybridge, includes elevated residential style -studios and suites, complimentary daily
breakfast buffet, complimentary light bites & happy hour 3 days a week, and ample amenities to
accommodate both short-term and extended -stay guests. Each suite features a fully equipped kitchen
including cooking and dining utensils, a full-size refrigerator, microwave and cooktop stove, toaster,
coffee maker, dishwasher & a dedicated dining area. The Applicant expects approximately thirty full-time
employees and fifteen part-time employees to work out of the site. The Applicant also expects the planned
improvements on this specific site will also result in approximately forty-five temporary construction jobs.
Apart from the revenue generated by hotel guests, the Applicant expects the employees will frequent
Village restaurants, gas stations, grocery stores, and more.
In addition to increased property tax revenues, sales tax, and employee impact, the hotel's presence will
Page 15
significantly benefit the local community as it will attract both new and returning customers who will also
frequent nearby establishments.
The redevelopment of the hotel is an essential development for the subject property and the area in general.
Staybridge Suites enjoy a brand and customer loyalty that is well known in the hospitality world. The
demand for the rooms and restaurant will greatly benefit surrounding businesses as the brand is considered
a destination location. Unlike many of its competitors, Staybridge Suites has not saturated the market and
therefore its customers often seek out the brand. This strong customer base will allow surrounding property
owners to attract new buyers and tenants.
The long-term outcome for the subject property if the Applicant is not granted a 7(b) and Staybridge Suites
does not open is negative based on its current and likely continued vacancy.
Approach to Determine Whether Class 7(b) Tax Incentive is Needed
In reviewing and analyzing whether a project can proceed Without a Class 7(b) tax incentive, we can
undertake various approaches to reach our conclusion. Each project is reviewed based on its own
characteristics, needs and economic conditions. While one proposed project may require a review of the
applicant's financial data and pro forma using an Initial Rate of Return analysis as was done here, a
different project will require looking at a yearly revenue analysis to determine whether the project meets
required net profits.
In this specific case, the current condition of the parcel also reflects a sense of abandonment. The obvious
ncgative impacts that follow this not only apply to the specific property but also extend to acljacecaL
properties. As the abandoned property becomes an eyesore and in many cases a bastion for undesirable
elements, the natural outcome is to decrease the value of neighboring properties, which can lead to a
domino effect. The subject property is facing this very real prospect. The proposed hotel redevelopment
will transform the currently underutilized area into one that will address the numerous issues that if left"
unaddressed will lead to larger issues in the years to come. In this case the Staybridge Suites will revitalize,
modernize, and make the subject parcel attractive, viable and one that serves to attract other end -users.
This undertaking will cost a significant amount of money, create new temporary and permanent jobs,
generate new sales tax, and increase overall real estate property tax revenues.. However, without the
improvements and substantial further investment, the property's future is bleak.
Page 16
Projected Redevelopment Costs
Table 1 summarizes the minimum projected costs of the Redevelopment. The numbers do not reflect
ongoing maintenance costs in the years to come.
Table 1 Projected Project Total Redevelopment Costs
Source REIT 200 LLC
Page 1 7
Property Tax Projections
Table 2 summarizes projected taxes for years 1 through 13 with and without a Class 7(b) incentive.
Please note year 13 reflects when the incentive terminates. The projections are based on a
beginning market value in 2027 (Year One) then increases of 10% every three years or on a
triannual basis rather than a yearly increase of 3% to more accurately reflect the method used by
the Cook County Assessor. The chart begins in 2027 based on the assumption that the Class 7(b)
incentive will be granted in 2025 and activated in 2027.
Sources Cook County Assessor, Cook County Clerk, SPM
We utilized a real estate tax based on the 2023 composite tax rate of 9.855 percent and the most recent
Cook County equalization multiplier 3.0163. For the illustrative purposes of this report, we assume
eligibility for a Class 7(b) incentive is granted in 2025 and activated in 2027. The projected tax for the
property with a Class 7(b) will be $374,013 in 2027 and $935,033 without a Class 7(b) or a difference
of approximately $561,020. In the table above, the 2037 (Year 11) Assessment Level increases to 15
percent, resulting in a difference of $497,812. In 2035 (Year 12), the Assessment Level increases to 20
percent, resulting in a difference of $248,906. In 2036 (Year 13), taxes return to the full 25 percent.
Table 2 also uses estimated taxes to demonstrate the additional property tax revenue that would be
generated by allowing the Applicant to modernize and improve the parcel with a 7(b) incentive. As the
Page 18
projections illustrate, providing the incentive will generate $5,954,104 over the life of the incentive
(2027-2035). If the property remains vacant, which is a strong possibility without the incentive, it could
produce $3,043,805 over the same period. However, a large devaluation of the vacant parcel during
those years is unavoidable and will result in an unexpected loss of tax revenue. Even with a 7(b)
incentive, the village and other taxing bodies will be assured a benefit of $5,954,104 over the life of the
incentive by allowing the redevelopment to go forward, which is $2,910,299 more in revenue than if the
property is left vacant.
For additional illustrative purposes, we project Staybridge in a best -case scenario to generate $3,745,655
total revenue in year one. This projection is aggressive because stabilization typically occurs in years
three or four. With the year one tax projection without a 7(b) of $935,033, the Applicant's real estate
taxes would represent 25% percent of its total revenue, which is unsustainable.
With increasing labor costs, uncertain interest rates, tariffs, supply chain issues, and other factors, the
cost to redevelop, and operational costs after completion of this project will result in an ever-increasing
need for the 7(b) incentive. Quite simply, the cost to own and operate this business is more expensive
today than it was even a year ago. A hotels performance depends on occupancy and average daily rates,
which often fluctuate based on even uncertain global economic conditions.
Projection of Hotel Building Cash Flow and Internal Rate of Return on Investment
Analysis WITHOUT a class 7(b) tax incentive:
To further assess the feasibility of the redevelopment„ with the real; estate tax amount of $935,033
(without a Class 7(b) tax incentive) azud annual debt serviceof $678,508.08 (and an 8.5% capitalization
rate, SPM Calculated the Net Operating Inconne (NOI), cash flow after debt service, Internal Rate of
Return (IRR), and. Rett�drn on hivestrnent (ROl`), and cornpare there to typical hotel sector benchmarks.
SPM used the financial and project data and project details provided by the Applicant and our own
review, calculations, and analysis.
Total Revenue: $3,745,655
Total Department Expenses: $974,659
Gross Operating Income: $2,770,995
Total Undistributed Operating Expenses: $1,123,734
Gross Operating Profit: $1,647,261
Insurance: $60,000
Taxes: $935,033
Management Fees: $74,913
Reserve for Replacement: $0
Total Fixed Charges: $60,000 + $935,033 + $74,913 = $1,069,946
NOI:
1,647,261-1,069,946=577,3151,647,261 - 1,069,946 = 577,3151,647,261 - 1,069,946 = 577,315
Debt Service:
Page 19
Total Annual Debt Service: $678,508.08.
SPM assumed the loan structure ($2,775,000 SBA 504 + $4,675,000 conventional) at conventional rates
and terms.
Cash Flow After Debt Service:
577,315-678,508.08= <101,193.08> annually (negative)
The negative cash flow indicates the project does not generate enough NOI to cover debt service,
signaling immediate feasibility concerns.
Project Details and Assumptions
Purchase Price: $4,000,000
Renovation Costs: $5,250,000
Total Investment Cost: $9,250,000
Equity: S 1,800,000
Loan Amount: $7450,000 ($2,775,000 SBA 504 + $4,675,000 conventional)
Holding Period: 10 years
Sale Price: Use 8.5% cap rate on NOI:
Sale Price $6,797,823.53
Transaction Costs: 6% of sale price = $6,797,823.53 x 0.06 = 5407,869.41
Loan Payoffs (Year 10)
Conventional 1 oan Balloon: $3,462,524.34 (%, 25-year amortization, 10-year term)
SBA 504 Remaining Balance: $1,753,448.67 (5.5%, 20-year amortization, after 120 months)
Net Sale Proceeds:
6,797,823.53-407,869.41-3,462,524.34-1,753,448.67=173,981.11
Year 10 Cash Flow:
—101,193.08+173,981.11=72,788.03
Cash Flows:
Year 0: -S 1,800,000 (equity)
Years 1-9:-$101,193.08 annually (negative due to insufficient NOI)
Year 10: 572,788.03
;step l: ROI Calculation
ROI= "otal Return -In Years 1-9:-$101,193.08 x 9 = 4910,737.72
Year 10: $72,788.03
Total:-$910,737.72 + $72,788.03 =-$837,949.69
PV of Years 1-9:-$101,193.08 x 9 =-$910,737.72
PV of Year 10: $72,788.03
Total PV:-$910,737.72 + $72,788.03 =-$837,949.69
NPV:-$837,949.69 - $1,800,000 =-$2,637,949.69 (negative)
The IRR is undefined or negative, as the cash flow stream (negative initial investment, negative annual
cash flows, and a small positive final cash flow) does not cross zero NPV, indicating no rate of return
that balances the investment.
For comparison, SPM looked at typical hotel sector benchmarks:
MR: 15111/in--201%o for hotel renovations, up to 2511/0 for riskier projects.
Page 110
Annualized ROI: 10%-15%, up to 18% for high -yield projects.
Debt Service Coverage Ratio (DSCR): 0.85
DSCR: 0.85A DSCR below 1.0 indicates the project cannot cover debt service, far below lender
requirements (1.2-1.5), signaling severe financing issues.
Project Metrics:
IRR: Undefined or negative (well below 15%-25% benchmark)
ROI:-146.55% (well below 10%-18% benchmark, indicating a loss)
DSCR: 0.85 (below 1.2-1.5, unfinanceable)
Comparison:
IRR: The negative or undefined IRR indicates the project loses money, far below the 15%-20% target,
making it not feasible.
ROI: A-146.55% ROI confirms the project results in a significant loss, compared to the desired 10%-
18% annualized return.
DSCR: A 0.85 DSCR means NOI cannot cover debt payments, making the project unviable for lenders
and investors.
Risks and Considerations:
Tax Impact: The $935,033 tax amount reduced NOI to $577,315, and combined with the debt service
($678,508.08), results in negative annual cash flows (4101,193.08). This makes the project
LiLisusLainar without significant changes.
Cap Rate Impact: The 8.5% cap rate lowered the sale price to $6.80M (from $8.25M at 7%), barely
covering loan payoffs ($'3.46M + $1.75M), leaving n'ummal proceeds ($173,981.11). A 9% cap rate
further reduces the sale price to $6,414,611, worsening outcomes.
Hotel Risks: The low NOI and high debt service, suggest unrealistic revenue projcctions or excessive
costs for the 200 E. Rand Road hotel. The market rrray not supporI the post- rcriovaLion performance,
especially with high taxes.
Conclusion:
Typical IRR Desired: 15%-20% (up to 25% for riskier hotel renovations).
Typical Annualized ROI Desired: 10%--15% (rip to 18% for high -yield projects).
Project Metrics with Taxes ($935,033), Debt Service ($678,508.08), and 8.5% Cap Rate:
IRR: Undefined or negative (well below 15%-25% benchmark)
ROI:-146.55% (well below 10%-18% benchmark, indicating a loss)
DSCR: 0.85 (below 1.2-1.5 lender requirement, unfrnanceable)
The project is not,"easr`hle without a Class 7(b) 'tax incentive. The high 'taxes ($935,033) and debt service
($678,508,08) result in negative annual cash flows, a low sale price ($6.80M at 8.5% cap rate), and a
negative ROI, making the project unprofitable and unfrnanceable.'
Analysis WITH a class 7(b) tax incentive:
To further assess the feasibility of the redevelopment, with the real estate tax amr°.rrrnt of $374,013 (with
a Class 7(b) tax incentive), and annual debt service of $678,508.O8 (and an 8.5% capitalization rate,
z SPM ran a sales analysis for illustrative purposes only,
Page 111
SPM calculated the Net Operating Income (NOI), cash flow after debt service, Internal Rate of Return
(IRR), and Return on Investment (ROI), and compare them to typical hotel sector benchmarks. SPM
used the financial and project data and project details provided by the Applicant and our own review,
calculations, and analysis.
Original Financials:
Total Revenue: $3,745,655
Total Department Expenses: $974,659
Gross Operating Income: $2,770,995
Total Undistributed Operating Expenses: $1,123,734
Gross Operating Profit: $1,647,261
Fixed Charges:
Insurance: $60,000
Taxes: $374,013
Management Fees: $74,913
Reserve for Replacement: $0
Total Fixed Clia�rges: $60,000 + $374,013 + $74,913 = $508,926
Updated NOI:
NOI=1,138,335
Debt Service (as provided previously):
Total Annual Debt Service: $678,508.08
Cash Flow After Debt Service:
1,138,335-678,508.08=459,826.92 annually
Project Details and Assumptions:
Purchase Price: $4,000,000
Renovation Costs: $5,250,000
Total Investment Cost: $9,250,000
Equity: $1,800,000
Loan Amount: $7,450,000 ($2,775,000 SBA 504 + $4,675,000 conventional)
Holding Period: 10 years
Sale Price: Use 8.5% cap rate on updated NOI:
Sale Price = 13,392,176.47
Transaction Costs: 6% of sale price = $13,392,176.47 X 0.06 = $803,530.59
Loan Payoffs (Year 10) (from prior calculations, unchanged as debt service change does not alter
balloons without updated terms):
Conventional Loan Balloon: $3,462,524.34 (5%, 25-year amortization, 10-year term)
SBA 504 Remaining Balance: $1,753,448.67 (5.5%, 20-year amortization, after 120 months)
Net Sale Proceeds:
13,392,176.47-803,530.59-3,462,524.34-1,753,448.67=7,372,673.87
Year 10 Cash Flow:
459,826.92+7,372,673.87=7,832,500.79
Cash Flows:
Year 0:-$1,800,000 (equity)
Years 1-9: $459,826.92 annually
Year 10: $7,832,500.79
ROI Calculation
ROI= Total Return Years 1-9: $459,826.92 X 9 = $4,138,442.28
Page 1 12
Year 10: $7,832,500.79
Total: $4,138,442.28 + $7,832,500.79 = $11,970,943.07
Total PV: $1,728,495.45 + $840,930.08 = $2,569,425.53
NP`V: 52,569,425.53 $1,800,000 = $769,425.53 (positive)
Total PV: $1 „529,09'9A3 + $568,069.02 = $2„097„ 1.68.45
NPV: $2,097,168.45 - $1,800,000 = $297,168.45 (positive)
Total PV: $1,395,0119.71 + $385,742.34 = $1,780,762.05
NP`V: $1,780,762.05 - $1,800,000=-$19,237.95 (negative)
IRR = 34.66\%
Again, for comparison, SPM looked at typical hotel sector benchmarks.
IRR: 15%-20% for hotel renovations, up to 25% for riskier projects.
Annualized ROI: 10%-15%, up to 18% for high -yield projects.
Debt Service Coverage Ratio (DSCR):
DSCR= 1.68
This meets the typical lender requirement of 1.2-1.5, indicating sufficient cash flow to support
financing.
Project Metrics:
IRR: 34.66%
Annualized ROI: 20.90%
DSCR: 1.68
Comparison:
IRR: 34.66% exceeds the 15%-20% target (and the 25% high -risk threshold), indicating the project is
highly feasible.
ROT: 20.90% annualized is above the 10%-15% benchmark (and exceeds the 18% high -yield target),
reinforcing attractiveness.
DSCR: 1.68 supports financing feasibility, as it exceeds lender requirements.
Impact of Tax Adjustment:
Tax Change: The tax amount $374,013 results in an IRR 34.66% and a ROI 20.90%.
Comparison to No Incentive: Compared to the $935,033 tax scenario (NOI $577,315, negative IRR), the
$374,013 tax (reflecting a 7b or similar incentive) restores feasibility, boosting NOI by 97% and turning
negative cash flows positive.
Risks and Considerations
Hotel Risks: Mount Prospect's proximity to O'Hare supports demand, but NOI depends on successful
renovation, branding, and occupancy. A 10% NOI drop (to —$1M) reduces IRR to —30%, still above
target.
Conclusion:
Typical IRR Desired: 15%-20% (up to 25% for riskier hotel renovations).
Typical Annualized ROI Desired: 10%o...-15% (up to 18% for high -yield projects).
Project Metrics with Taxes (5374,013), Debt Service ($678,�508.08), and 8.5% Cap Rate:
IRR: 34.66% (exceeds 15%-25% benchmark)
Annualized ROI: 20.90% (exceeds 10%-18% benchmark)
DSCR: 1.68 (above 1.2-1.5 lender requirement)
Feasibility: The project is highly feasible with the tax projection with Class 7(b) tax incentive of
Page 113
$374,013, as the IRR and ROI significantly exceed industry standards, and the DSCR supports
financing.
Page 114
CONCLUSION
Typically, when determining whether we recommend the need for an incentive we take into
consideration the redevelopment program, redevelopment cost projections, revenues and expenses and
other financial information discussed above, however, in certain cases such as this one the financial
information isn't the only determining factor to consider. The intangible benefits for the subject
property and surrounding properties must also be heavily considered in reaching a decision along with
the additional overall taxes the project will generate.
Therefore, granting the Class 7(b) incentive may in this case ensure that the blighted area does not
expand into other areas, but rather may bring (for the reasons articulated above) commercial success
to the Village of Mount Prospect for years to come. This is remarkable under the current economic
uncertainties we are facing due to post -pandemic adjustments, tariffs and supply chain issues, inflation,
uncertainty about interest rates, fluctuating climate and environmental regulations and other factors.
Without the assistance from the Class 7b Tax Incentive, the Applicant will be unable to redevelop the
hotel and may instead look to sell off the land and leave it undeveloped and vacant. Future owners of
the parcel with multiple years of vacancy may neglect the property and stop paying their taxes, resulting
in total loss for the Village. Any future owners will be seeking the same incentive.
Due to the reality that the Applicant cannot feasibly open this Staybridge location without a Class 7(b)
incentive because the property taxes make it financially impossible, and in not doing so cause the
Village of Mount Prospect other taxing bodies to lose millions of sales and property tax dollars, we
must conclude that granting the Class 7(b) incentive in this specific case is imperative.
Additionally, the cash flow projections show that it would not support a high enough return to make
undertaking the investment financially feasible without the Class 7(b) tax incentive. Providing the
Applicant with the Class 7(b) incentive is the only way to ensure feasibility. Without a 7(b) incentive
the IRR we project is negative, and the ROI is-146.55 (also negative). No developer would undertake
a project to realize such a return. By providing the incentive the IRR we project is 34.66, and the ROI
is 20.90. As stated above, these are within the customary acceptable IRR and ROI levels for a project
associated with this type of financial risk under normal circumstances. We therefore once again believe
the incentive is essential.
Page 1 15
Photos of Subject Property 2025
Page 11
xy d
r
f
y
bi a�y
` v G4,
dC w Yro im3W"
44 m a i
"dh..." �Y W,
�
"�'.. :i�,i�
aM, „a ,aak, r,„""��✓ :�S�x .,
°„!�- ��„"h ,�h ... W,.�MA��F(l iM.� R �y�a
", a• J»�,' r
'" a9 4" i �l
a
Y"+�^ a' e a "aA qM r'b*w'4 iiry w
r '�
a
a
It
if
r""•4+'��aw
'
.6m rep"
pn 4
t 7
Al
i" W 4
QA"
Vi
TO 1�4
A
7,,s
Vol
...... ....
Rm 4S
K, V. wl,
r
✓ ~µ
q m w n
�14 't
w
r a
07 w
� y Yya
Y M i mm
4kti "
0
lu
W
{
f� I 9
°v
ip
r
ti
f
„+
1 t
l
VILLAGE OF MOUNT PROSPECT
DESCRIPTION'
The Village is a home -rule unit of government located approximately twenty-two miles northwest
of downtown Chicago, Illinois. It was settled in the 1870s and later incorporated in 1917. The
current population is approximately 5 ,852. The Village is governed by a Inayor and a six -member
Board of Trustees elected at large for four-year terms. The Village Manager handles clay -to -day
operations and is appointed by the President and the Board of Trustees. The Village has
approximately 304 brill -time and twenty-seven part -tinge employees. In addition, approximately
fifty-four seasonal employees are hired throughout the year. Listed below are the unions to which
192 of the full-time employees are members.. The Village considers its relationship with its
ernpl.oyees to be cordial.
Village residents benefit from top -rated public safety technology and services. The Fire
Department has earned one of the best fire ratings (ISO Rating Class 2), the Police Department
has achieved international police accreditation and the Public Works Department's community -
wide recycling and urban reforestation programs have served as models for other communities.
The Mount Prospect public Library is at the forefront of information technology used to
supplement research efforts.
In November of 2008, BusinessWeek named the Village as the winner of its second annual review
of the "Best Places in America to Raise Lids." According to the report, the Village was able to
achieve this ranking because of low crime, affordable homes, award- winning schools and small-
town charm, coupled with conservative fiscal values and community involvement.
The Village's downtown and other commercial areas have experienced significant private and.
public reinvestment over the past several years, including the redevelopment of the 1.3 million -
square -foot pandhurst Shopping Center, the first enclosed regional shopping center in the area.
Residential convenience goods, banks, government services, restaurants and service
r�.,stablrshrrrc,rrts � can be1 sound throughout the downtown area. The addition of' townhomes and
luxury condominiums in the town center is furthering the Village's vision of" a mixed -use
downtown district.
The Kensington Business Center attracts numerous high -profile corporations with its twelve
landscaped lakes, winding jogging trails, recreational park and picnic areas, as well as its
proximity to O'Hare International Airport. Lake Center Corporate Park is the second largest
industrial district within the Village and offers unique "build -to -suit" opportunities for office and
manufacturing facilities. The Lake Center Corporate Park has recently been improved with
landscaping and public infrastructure designed to support a variety of uses.
Village residents of all ages are served by four area park districts maintaining nearly four hundred,
acres of parks and recreation facilities within the Village. The park districts provide an outdoor
wave pool, two golf courses, a miniature golf course, a sled bill, outdoor skating rinks,
playgrounds, ball fields and tennis courts for residents. The Cook County Forest Preserve also has
facilities nearby.
' Village of Mount Prospect, Cook County, Illinois General Obligation Bonds, Series 2022 (IL). Final Official
Statement Dated January 18, 2022.