Developers, City Agree on Profit-Sharing Plan

In a unique arrangement, developers Phil Mappa and Colin Regan agreed to give the city 22% of their profit above $4 million on the project before the community development commission endorsed their request for tax increment financing Tuesday. They project their profit to be a relatively slim $2 million on the development, partly because of the price MR Properties has agreed to pay for the 24,000-sf vacant lot between Morgan and Sangamon streets. MR Properties will pay $3.6 million, or $149 per sf, for West Loop land that has soared in value in recent years.

"Without TIF, this project would not be feasible," says Colleen Stone of the department of planning and development's finance division.

Mappa explains the sellers bought the property nearly four years ago and must recoup holding costs, including interest, in any sale. However, he notes the land value is not out of line in the rapidly appreciating West Loop. Indeed, although it is immediately east of the Kennedy Expressway, the two developers are paying the city $229 per sf about a half-mile away for two acres at Madison Street and Des Plaines Avenue.

The 22% figure matches up with the amount of units being marked down in price to $125,000 for one-bedrooms and $150,000 for two-bedrooms. Mappa and Regan will sell the remaining one-bedrooms for $248,000 and up, with the two-bedrooms topping out in price at $479,000.

With the city's department of housing already lining up potential buyers for the affordable units, including a nurse and editor, MR Properties will meet its pre-sale requirement for construction financing, which likely will be provided by IndyMac Bank.

Although community groups sought larger units in the building, Mappa says the market for them is lacking, resulting in a design that calls for one- and two-bedroom condominiums. "The units that are selling the most in the West Loop are the one-bedroom units or smaller two-bedroom units," Mappa says.