However, that could change, just as the Downtown multifamily rental market has in recent years.

"The apartment rental market has changed for the worse," says Smithfield Properties partner Robert Buono, whose company is buying the property on the opposite corner of Block 37 for $9.58 million. "Greater flexibility is required for the middle part of the building."

While the market has been on the skids since Smithfield Properties was one of three developers to answer the city's request for proposals in July 2001, the Central Loop site is next to a parking garage, which would likely hinder the marketability of condominiums on the third through eighth floors. And if the multifamily rental market fails to improve by 2005, architect Lucien LaGrange's design allows Smithfield Properties to turn the proposed apartments into offices or hotel rooms.

The city, which owns the two-story retail building that includes a Walgreen drug store operating under a month-to-month lease, was hoping to get $7.9 million for the property. Smithfield Properties bid $10 million, but the price was reduced when the developer agreed to make a portion of the retail space available to a local "mom and pop" retailer at a reduced rental rate. The city's department of planning and development calculated the value of that discount at $420,000.

Some members of the community development commission, which recommended city council approval of the land sale and project Tuesday, thought some of the condominiums and rental units should have been set aside at affordable prices. However, department of planning and development officials say their focus was on affordable retail space.

"They're paying more than what we paid for the property," says department of planning and development commissioner Alicia Berg. "They're requesting no tax increment financing assistance. There's no land write-down."

Had their been city financial assistance, the project might have fallen under a new affordable housing ordinance, requiring up to 20% of the units set aside for buyers and renters earning less than the area median income.

Buono says Smithfield Properties is setting aside $1.2 million for tenant improvements. He adds a coffee shop, grocery and florist are among potential "mom and pop" retailers eyeing the retail space.

Instant Insights /

Flexibility Built Into $65M Multifamily Tower

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