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WAUKEGAN, IL-As it gets down to the final pieces of the puzzle at its Fountain Square at Lombard mixed-use project, Shaw Development Co. aims to build a similar development here on the leveled 98-acre site of the near-vacant Lakehurst Shopping Center. The Oak Brook, IL-based development company, whose projects have run the gamut from Lake Point Tower and Luther Village in northwest suburban Arlington Heights, has a contract to buy the 1-million-sf mall on Route 120 from Richard E. Jacobs Group.

After demolishing a shopping center now down to Carson Pirie Scott & Co. as the lone tenant, Shaw Development would begin selling individual parcels to prospective owners, then building the elements of Fountain Square at Waukegan. Likely buyers, company president Dennis J. Stine says, could include restaurants, hotels, banks and office builders.

While putting up $20 million in equity, Shaw Development Co.’s SDC Waukegan Venture LLC is seeking a tax increment financing package worth $30 million. In addition, the city is offering to buy the southernmost 32 acres of the site for $5.5 million for a use yet to be determined. Single-family homes is one possibility for the land, which Chicago-based REIT AMLI Residential Properties Trust had eyed for multifamily rental development, which the city nixed.

The Lake County Assessor’s office pegs the market value of Lakehurst Shopping Center at less than $18 million, but 91% of that value is in the land.

“In basic terms, our plans is to start over with this property,” Shaw Development attorney Robert J. Pugliese tells the lakefront city’s often skeptical community development commission Tuesday night. “There’s a continuing downward spiral that’s not abating. It’s getting worse.”

While it may be less ambitious than local developer Martin Tuohy’s $800-million University Station vision, Shaw Development’s plan gives the city, as well as the company, greater control over building on the site, says Pugliese, an attorney with Lord Bissell Brook.

Former College of Lake County president Jack Adams, who was involved with Tuohy’s 2001 attempt to acquire the shopping center from Jacobs Group, asked the commission for more time to present an alternative proposal. He says three educational institutions are committed to taking 200,000 sf at the indoor mall, “with three more waiting in the wings.”

Tuohy’s plan that included education among office, condominium and entertainment uses died when his group was unable to raise equity, forfeiting earnest money after extensions.

“I tell you we remain viable and are ready to go ahead,” Adams says.

However, Pugliese tells GlobeSt.com Shaw Development Co. has spoken to Tuohy, and the latter would be welcome to buy property in Fountain Square of Waukegan.

The community development commission postponed action until next month, but members said they needed more time to study details of a plan received only in the last few days. Besides the $30-million TIF request and Shaw Development’s land sale to the city, the project’s forecasted property tax and sales tax revenues will be scrutinized.

While the location near US 41 and the Tri-State Tollway are plusses, Lakehurst is in Warren Township. As a result, schools in neighboring Gurnee, rather than Waukegan, will benefit from property taxes. As a result, some commission members are looking for more sales tax proceeds.

“For the city to benefit, you need sales tax revenue,” says Peter Couvall.

For now, Richard E. Jacobs Group is paying $537,956 this year in property taxes, according to county records.

Commission chairman John Della Valle was miffed the plan went to the city council first, rather than following normal procedures.

“I’m all for getting the dead fish out of there, because it’s been a blight on the city,” Della Valle says. “I just don’t want the city to get the short end of the deal.”

Meanwhile, Michael Melius wonders if the potential buyers will be a significant improvement over Lakehurst’s current situation. “It’s commercial out there now, and it ain’t working,” he says. “Commercial use doesn’t appear to work. Why would the free-standing stores work?”

Later phases will include land on the western edge of the shopping center, which consists of free-standing Jewel grocery and Ace hardware stores. Leases prevent them from being part of the initial phase, Pugliesi says.

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