Redeveloping Motels May Be No Easy Trick

Lettvin Development Co. has been tapped by the city's Department of Planning and Development to build two 32-unit condominium buildings at 5900 N. Lincoln Ave., now the 35-unit Lincoln Motel, as well as the former Shilla restaurant at 5930 N. Lincoln Ave., which Richard and Sheryl Lettvin have under contract. American Landmark Properties, Ltd. has been selected to build 13 townhouses at 6250 N. Lincoln Ave., now the 31-unit Patio Motel.

The two development teams got the blessing from the community development commission to negotiate with the motel owners, with the club of potential condemnation by the city, which is prepared to kick in $500,000 per site to make deals work. The difference, city officials say, is largely the result of the businesses being worth more than the land the motels are on.

Although residents and 40th Ward Alderman Patrick J. O'Connor have railed against the motels, owners have hired an attorney who assailed the city's redevelopment schemes and use of tax increment financing. Also, eyebrows were raised by commission members at the cost of the units - $185,000 to $290,000 for Lettvin's one- and two-bedroom condominiums and $225,000 to $270,000 for American Landmark Properties' townhomes - and lack of affordable housing in the plans.

"One can drive up and down the length of the TIF district and see vacant land, substantial vacant land, and vacant storefronts," says attorney James Chapman. "We are in a time of budget crisis in the city, and an affordable housing crisis."

Chapman adds the motels generate 2% room taxes and provide employment. These companies are substantial contributors to the community," he says.

While Chapman claims eight motels on the city's acquisition map are being singled out, city officials note 11 other commercial properties are being targeted. The department of planning and development is negotiating with as many as seven more developers for four other sites.

Both properties carry property tax assessments that equate to market values of $600,000 each, but city officials concede the motels are "cash cows" that have a much higher business value. "They're rather profitable," says department of planning and development commissioner Alicia Berg. "The acquisition price is not necessarily indicative of the price for residential housing. We have to buy it for the use that it's in."

That use is $50 per night motel rooms, which are about 65% occupied, owners say. Longer-term tenants include people between jobs, moving in from outside the city or in crisis, owners say, who cannot afford Downtown room rates.

American Landmark Properties' Al Gluck says his $150 per sf price is an entry-level rate for the North Park community. Adds Richard Lettvin, who hopes to break ground this fall, "I would say $185,000 is about affordable as you can get here."