Skokie To Loan Developer $4.5 Million To Build Hilton Hotel Downtown

SKOKIE, IL — Village trustees authorized the village manager to loan $4.5 million to a developer facing cost overruns as he seeks to build a hotel in downtown Skokie.

The loan comes on top of $13.5 million of tax increment financing that the village has already promised to support E&M Strategic Development's project to build an eight-story, 142-room Homewood Suites by Hilton at 4930 Oakton St.

"The current challenging market factors such as significant cost escalations for construction materials, labor shortages and changing capital markets, including fluctuating interest rates, have impacted the project's finances," said Village Manager John Lockerby.

The $4.5 million loan would come from the village's Economic Development Fund, which is financed by real estate transfer taxes collected by the city.

"The loan is critically important for the project to proceed as planned to meet a projected opening in 2024," according to a memo to Lockerby from Community Development Director Johanna Nyden and Economic Development Manager Len Becker, who explained that the developer has already spent $9.5 million of the TIF financing pledged by the village board.

Village staff estimated the loan would generate an annual return of 12 percent, or $540,000 a year. Half of that money would be returned to the development fund, while the other half would be used for priorities of the village board.

Lockerby said the developer contacted staff about earlier this year to "let us know the challenges that he was having" regarding financing the project.

"We are not the only part of this additional funding that is being sought, and so the developer is looking at additional equity partners, he's looking at additional programs through the federal government and he's looking at additional financing options," Lockerby said.

If the village did not approve the loan, it would delay completion, the village manager told trustees ahead of the April 3 meeting at which the proposal was introduced and approved.

"There's value in the village participating if we so choose, but the problem will be solved one way or another if we don't participate," he said.

Finance Director Julian Prendi said offering the loan to the developer was unprecedented, but village staff strongly recommended it.

"We've struggled with development in the downtown area for several years, and I don't ever recall a project that we valued as highly coming in," Prendi said.

"Just as a note, this project is anticipated to bring in $1.2 million in property taxes a year, $600,000 in combined food and beverage and sales and hotel tax a year," he said. "So we see this project long-term, we recognize its value, and this is an unusual circumstance."

Village officials appear eager to avoid a repeat of Skokie's last major downtown public-private partnership.

That project, 8000 North, stalled when the first developer the village board selected was unable to secure financing, leading to years of delays and his eventual replacement. The project was eventually completed last year, about four years after a ceremonial groundbreaking.

Rachel Van Hoose was one of several residents who questioned the deal prior to its approval. She said the developer should secure financing from its capital partners, rather than from village taxpayers.

"Can we just call a spade a spade? I mean we're paying $4.5 million to one man who can't pull off his project. The cost of building materials going up? I don't care," Van Hoose said.

"I believe that this developer is not capable of pulling off this project," she said. "I don't think they have the experience, and I don't think they have the money."

Other residents who spoke during the meeting noted that the developer had contributed to the ruling Skokie Caucus Party, of which most of the village board are members.

Evanston-based E&M and its CEO Mark Meyer have donated a combined $1,000 to the Caucus Party, with the first donation coming a month before the village board approved the development, according to the Illinois State Board of Elections.

Louis Mercer said he was deeply concerned about the developer's donations.

"And they are now poised to receive an unprecedented loan, voted on by a village board dominated by that same party. Without more transparency, this continues to add to the mounting evidence — along with the Carvana tower, the Open Meetings [Act] violations, the attempt to block a citizen-led election reform effort, the attempted bribery of a candidate for village board, and, tonight, the appointment of a plan commissioner without sufficient time for the village to open the process to all willing applicants," Mercer said.

"The Skokie Caucus Party seems to have a penchant for making sweetheart deals and skirting the norms of ethical governance," he said. "This smacks of corruption."

Trustees Khem Koeun, Ralph Klein, Alison Pure Slovin, Edie Sue Sutker and Mayor George Van Dusen voted in favor. All five are members of the Skokie Caucus Party. Trustee James Johnson, an independent, voted against authorizing the loan. Trustee Keith Robinson was absent from the meeting.

Related:
Deal For 8-Story Hotel In Downtown Skokie Approved By Trustees
Residents Question Approval Of Downtown Skokie Hotel Development
Skokie Borrows $27 Million For Hotel TIF Funding