High interest rates stall Uptown Normal building project
Rising interest rates have blocked the hoped-for start of construction this spring on a flagship development project in Uptown Normal.
The town had hoped to ink a development agreement last fall with Cedar Rapids, Iowa-based Eagle View partners on the $50-$60 million Trail East and West projects on Uptown Circle. City Manager Pam Reece said that's still in process.
"We've had conversations as recently as last week. We are constantly coming to the table and talking about what the market looks like, what their financing looks like and when they'll be ready to go, but we don't have that ironed out yet," said Reece.
Eagle View had planned to do Trail West first and leave Trail East for later. Originally, the town council approved Trail East in 2017, but progress became a casualty of the pandemic. The mixed-use buildings would straddle Constitution Trail on the north side of Uptown Circle. There would be space for retail shops and restaurants, commercial office space, and more than 150 residential units. The five- or six-story structures would add about 198,400 square feet of space to Uptown Normal, town staff said last year.
"It will bring new and expanded commerce, create office space that will increase employment, and allow for many individuals and families to call Uptown Normal home," staff said at the time.
Retail would go on the bottom, offices in the middle, and residential on top. Last year, the town moved ahead with some site work, a transformer relocation, and engineering studies to make sure the land was ready, pending approval of the development agreement.
Last year, Eagle View told the town its financing package was in order and a spring 2022 construction start was realistic.
Eagle View has been working with its "financing team and their investment team, so we continue to move forward," Reece said in June of 2021.
Now, it appears the developer’s assurance was premature and the Federal Reserve's decision to raise interest rates to curb inflation has changed the balance sheet.
“They are actively trying to find ways to cut construction costs and to find acceptable financing,” Assistant City Manager Eric Hanson said Tuesday. “When they started, interest rates were 3%. Now they are 7%.”
At the start of the development of One Uptown in the 2000s, then called One Main, the original developer pulled out when financing collapsed during the Great Recession. When the town revived the project, council members chose a different developer.
“Sometime in the first quarter, I think, they will decide whether to go ahead or to pull out,” said Hanson.
Reece said she doubts Eagle View is close to pulling out and discounted the chance the same scenario could happen. She said the town's goal is to get the land on the property tax rolls, add value to the tax base, and business activity to Uptown.
There is an uncertain degree of urgency for Eagle View because the project depends, in part, on benefits from the Tax Increment Financing District (TIF) that offers incentives based on rebated property tax from the land value created by the development. The TIF expires in 2038, Hanson said.
It’s unclear how many years of TIF rebates the project needs to make it financially viable, Hanson said, because the town has not seen the final design. He said the precise buildings Eagle View would construct depends on its ability to get financing.
The buildings were contemplated in the now two-decade-old Uptown redevelopment plan.