Chicago suburbs face obstacles in redeveloping malls

Efforts by two Chicago suburbs to redevelop dilapidated shopping centers are confronting fiscal and municipal obstacles ranging from an owner’s delays to local qualms about meeting an affordable housing threshold.

In Northbrook, officials granted a second extension to Brookfield Properties, the owner of Northbrook Court, to revise its redevelopment plan for the mall. In Arlington Heights, officials are concerned that a proposal to turn a 1980s-era shopping plaza into apartments won’t integrate affordable units into the rest of them.

Re-use can’t come soon enough for malls that in some cases date back decades. Schaumburg developer Urban Street Group wants to build a 302-unit apartment complex on the north side of Arlington Heights’ 1980s-era International Plaza and a commercial development with office and retail components on the south. The village has been trying to redevelop the property since 2002.

“It’s dangerous over there,” said Arlington Heights Trustee Rich Baldino. “It’s falling down.”

The struggles underscore the difficulty of bringing large, outdated shopping centers into the 21st century as suburban communities grapple with opportunities and challenges those properties present in a market starting to reset after two years of disruption.

Arlington Heights tried to spur the redevelopment by putting the mall into a Tax Increment Funding District that it extended for 12 years in 2014. Over the years, a contract with another developer and an agreement with a major retailer have fallen through and the property has been the subject of numerous lawsuits, Charles Perkins, director of planning and community development for Arlington Heights, said at a village board meeting this week.

“We work very hard to find solutions for challenging development sites,” Urban Street Group senior vice president Jon Dennis told the village board on Monday, acknowledging the many starts and stops efforts to redevelop the property have faced. “We think we have a great solution to make it happen.”

Of the apartment units Urban Street proposed, 37 would be designated as affordable housing for seniors. While that tops the percentage required by the village’s inclusionary housing ordinance, some trustees said they were concerned about Urban Street’s plan to have those units built in a separate building by another firm, Northpointe Development Corporation. The ordinance calls for affordable units to be integrated with the rest of the units and built at the same time.

The Urban Street plan allows the developer to fund the project with federal tax credits, without which it’s hard to build affordable housing, Dennis said.

“My concern is that creates a situation where you are segregating your affordable housing,” said Village Trustee Mary Beth Canty. “It creates an incentive to put affordable housing in one area of the community and not intermingle it with the market rate,” raising questions about whether residents will have access to amenities,” she said.

In Northbrook, officials approved $27 million in subsidies three years ago to overhaul Northbrook Court at 1515 Lake Cook Road, according to Crain’s. The village board voted last month to extend a deadline for the mall owner’s revised redevelopment plan to Dec. 23 from Aug. 1, the second time the board approved a shift in timing in as many years. A $250 million redevelopment plan that it signed off on in 2019 was delayed due to the pandemic.

The developer behind Brookfield’s original redevelopment plan for Northbrook Court is Ryan Properties, the same company that Arlington Heights was at one time under contract with for a previously proposed redevelopment of International Plaza.

In 2021, a group led by New York-based Brookfield stopped paying the $117 million remaining mortgage on the mall, leading lender Barings to shop for brokers to potentially sell the 1-million-square foot property. Northbrook Court was also among the malls that Cook County reported had skipped a property tax payment last year, and its vacancy rate has jumped as department stores and other smaller retailers have closed.

Brookfield told Crains that it plans to finish what it started, without providing details. The firm recently repaid the mall’s $131 million loan from Barings.

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