The former State Farm building is a roughly 200,000-square-foot, 13-story pillar in historic Downtown Bloomington.
Justin Fern is one step closer to completing a full renovation of the building. Fern is founder and CEO of Urban Equity Properties [UEP], the Rockford-based company behind the planned G.J. Lofts.
“This building when we’re all said and done, we’ll end up with 183 loft apartments,” Fern said in an interview for WGLT’s Sound Ideas.
Phase one, he said, will consist of 57 apartments and a top-floor restaurant in the barrel portion of the building's original boardroom, and the ground floor will include a food hall with a Starbucks and several other restaurants in the hall itself.
Phase one is set for completion next summer.
The mixed-use residential and commercial center has plans for a rooftop deck, fitness center and tenant lounges.
Phase two will include the final 126 apartments, with completion scheduled for summer 2028.
“It’s a historic tax-credit project, so we’re utilizing the federal historic tax credit, which is a 20% credit, and also a whole number of different things in the capital stack,” said Fern.
Fern said it has taken UEP about five years to get construction started on the project, adding it feels like a breath of fresh air, that a weight has been lifted.
“At the same time, other stresses and other things that I’m thinking of now that we’re under construction have begun,” he said. “I’m just super excited that we made it to this point. We’ve told and guaranteed everyone for years that this project was going to happen, and I think for a while maybe some thought that it wouldn’t happen…”
Fern said the COVID pandemic and rising interest rates in 2023 disrupted the previous timeline.
Today, the market is in much better shape, he said. In its other properties, Fern said UEP’s residential properties run close to full occupancy and are managed in-house.
“We’re going to build a very, very upscale apartment finish that really Downtown Bloomington hasn’t seen yet, and even I think Bloomington as a whole hasn’t seen yet,” he said. “We planned some very, very nice units, so we feel strongly that we’ll be able to command the rents that we’ve set out to get.”
Those are about $1,200 a month for a studio apartment and two bedrooms for around $2,000 on 12-month leases.
From office to apartments
Fern first learned of the State Farm building around 2016. His purchase came in 2019.
Before that, he said it was on his ongoing list of interested properties to acquire, but he felt comfortable pulling the trigger when he learned the building was facing demolition.
“I just couldn’t believe it. I think State Farm thought it was at that point, they’ve had not just one but multiple deals that didn’t end up closing come to fruition and they were just frustrated,” he said. “They didn’t know what to do at that point. I really don’t think deep down inside they wanted to tear down the building…”
So, Fern jumped at the chance and contacted the Bloomington-based insurance company to say he was interested. He first envisioned apartments.
But then UEP was contacted by Kepler Vision. Fern said the optometry firm was in need of new office space.
“They loved this building, and I believe they probably were in touch with State Farm prior to our purchase and couldn’t get a deal done with them to rent office [space],” he said. “They contacted me and I did not plan to keep it office, but it was one of those deals where it was, in a sense, gold from the sky…”
However, Fern said it would not have been a good mix to have partial office space and partial apartments, and Kepler agreed.
“When you’re running a high-end professional office tenant who has to have extreme security in place for medical records and different things, it could get challenging when you throw residential into the building that would potentially be sharing the same elevators,” he said.
In looking for additional office tenants, there was plenty of interest, Fern said. However, all the interested parties did not need as much room as the non-Kepler portion of the building had to offer.
“…We had these huge floor plates that were over 14,000 feet per floor, and the building really wasn’t designed to be cut up that way,” said Fern. “It was really designed to be wide open, 14,000 [feet] floor plates for State Farm.”
Cutting up the floors into various offices and spaces with all different leases was not feasible. So, Kepler did not renew its plans with UEP.
That brought Fern and UEP back to the original plan for upscale apartments.
Once apartments are ready for move-in, Fern said they will be most suited to young families or single professionals.
“Our typical properties range from 25 to 45 in age, women and men,” he said. “This isn’t a student housing project, just to be clear about that.”
Fern said the apartments would be marketed more to college professors than to college students, for example.
“Or the same thing goes for some of the corporations in town, including Rivian, State Farm, and some of the large employers here in town,” said Fern. “They have lots of new hires and talent that they’re trying to retain, but really minimal housing inventory in the market, and we’re just trying to help with that issue.”
Renovation initiation
Fern said the project is a challenging one. With the final project completion date still two years out, he said they aren’t taking any shortcuts, adding they started as soon as the building was bought.
“I think then the second challenge is actually closing the capital stack. It’s been a long way to get to this point, but the capital stack is complex,” Fern said.
“It has a number of different sources of capital in it, from federal to state to city to our own equity to banks. It’s a whole number of different financial instruments in this thing, and you have to basically align the stars and get it all closed, and we’ve done that now.”
A capital stack is a mix of a company’s financing sources, including debt, equity and investments.
Then comes the actual renovations with construction finally beginning this week.
“…The actual construction, headaches converting a building from office to residential, I mean, if you can imagine open heart surgery,” he said. “That’s kind of what we’re doing this to property; we have to keep the building alive. We can’t let the structure itself and some of the infrastructure die while we’re working on the inside of the property…”
“Obviously we have to get plumbing and infrastructure to every one of those spaces, so you can imagine taking this ceiling and installing drains and plumbing and vents in every one of those units.”
As the name G.J. Lofts is a nod to State Farm founder G.J. Mecherle, the building will have other mementos from the insurance company. Fern said that includes incorporating some of the original art deco design from when the building first opened.
Construction new and old
UEP has taken on challenging construction projects before, Fern acknowledged. This is no different, but he said tax credits help.
“We are the largest user of the state historic tax credit in the entire state of Illinois,” he said, referencing the state’s program for rehabilitating historic structures with approved rehabilitation plans.
“…But I could tell you, this is what we do," he said. "We take many mid to high-rise vintage buildings and have over the years converted them to apartments with ground floor retail and restaurant space…”
For example, UEP renovated the buildings now known as Burnham Lofts in Rockford and the Terminal Building in Aurora, Illinois.
"This one’s 200,000 [square] feet, we’ve done 120-something thousand feet at Telcot, so similar building. Both 13-story buildings,” said Fern. “Again, this is not just development and ground up construction, this is restoration at the same time, or we’re modernizing the interior with beautiful apartments at the same time.”
Like other projects, Bloomington also offers a historic Downtown that is undergoing its own facelift construction projects. Fern said there exists a possibility to renovate other buildings in the area as well.
“We’ve actually since purchased the auto-hotel here across the street as an example, and that was beautiful and still is, it needs work,” he said. “It was beautiful art-deco parking garage or car hotel, and we’re going to bring it back to its original glory, and we’re excited about that.”
It’s a passion Fern has had for a long time, he said. He loves historic buildings and he loves fixing them up.
“My passion is really saving these buildings that in some cases, decades were dark, no lights on, dark, in disrepair, and then after we’re done with the conversion, when we finally open the building after years of construction, in a lot of cases, you see all the lights come back on…” he said.
A groundbreaking is set for June 1.
