Department Staff have been working with RPS Capital since last year regarding potential re-tenanting of the vacant 100,000 square foot box space at Southpoint Shopping Center.  The property owner, RPS Capital has requested financial assistance through the use of Tax Increment Financing (TIF) funds towards the landlord’s physical improvement costs, such as roof replacement and renovation environmental abatement, façade, and site work.  During this time of continued retail shrinkage and many retailers are struggling or leaving shopping centers, RPS Capital has negotiated a letter of intent (LOI) with a tenant, At Home, The Home Decor Superstore that would occupy the entire renovated 100,000 square feet of vacant retail space.

RPS Capital has provided two scenarios for redevelopment of the shopping center.  The first is for reuse with the furniture store as described above with a significant capital investment being made by RPS and with the requested TIF assistance.  The second would be for an antique mall with significantly less capital investment required by RPS Capital.  Village Staff along with consultants retained by the Village, SB Friedman Development Advisors have performed an analysis to evaluate whether the project as presented was justifiable in requesting TIF financial assistance in order to generate minimum sufficient market rate returns.  As a result of this review, an analysis and the benefits are providing a viable sales tax generator for the shopping center and for the Rand Road/Palatine corridor.  Staff has negotiated a lower amount than originally requested by RPS Capital.  The negotiated Redevelopment Agreement in the amount of $1.3 million is attached. 

Southpoint Shopping Center Issues

Southpoint Shopping Center has struggled with occupancy over the last 15 years or so.  Over the years, the Village has issued Request for Proposals to solicit developers to redevelop the property, worked with and encouraged the multiple ownerships of the property to collaborate and work together, and attempted to attract viable retailers to the marketplace.  The following is a summary of shopping center issues.        

• Multiple ownership – over the years and continues today, Southpoint Shopping Center is owned by multiple different entities.  For many years, three major players owned the larger portions of the shopping center.  More recently, the in-line tenant space and associated land was sold and the vacant BIF Furniture building was sold and purchased by RPS Capital.  RPS Capital are interested in investing in the property.          
• Chronic Vacancies - Over the years, the shopping center has struggled with chronic vacancies.  Initially, the CUB foods, subsequently other users had languishing sales and was vacant for a time.  Since then, Floor and Décor has reoccupied, the former Garden Fresh tenant space.       
• Marginal Tenant/Prior Owner Issues - The 100,000 sq. ft. tenant space has been vacant for three years.  Since 2008, there have been marginal sales taxes generated by this space.         
• In late 2019/2020 VASA Fitness presented a plan for the property which was subsequently withdrawn.
• The proposed furniture store tenant is estimated to generate increased sales taxes to the Village and investment in the center will increase property taxes and enhance the viability of the Rand Road/Palatine Road corridor. 

Benefits of Providing TIF Assistance

There are several benefits to a Redevelopment Agreement for RPS Capital to attract the furniture store to Arlington Heights, these are summarized as follows:

• Significant investment into this portion of Southpoint Shopping Center would help jump start and solidify the center as a retail destination where in the past, it has been impossible to facilitate such investment.
• There are very few viable retailers in the marketplace to expand into 100,000 sq. ft.  During this time of continued retail shrinkage, many retailers are struggling and shopping centers, such a Northbrook Court and others are converting vacant retail space to noncommercial uses.  The vacant 100,000 sq. ft. former BIF Furniture space is in desperate need of revitalization, which this project would provide.      
• The TIF incentive would attract a new tenant to Arlington Heights versus going to another community.
• It would provide a shot in the arm to Southpoint and the Rand Road uptown corridor.         
• It would add additional jobs to the area.         
• Redevelopment would provide additional new sales tax to the Village.

TIF V Fund and Financial Request

The TIF V fund at the end of 2020 had a fund balance of almost $4 million.  Commitments for the TIF V funds are the Town & Country Redevelopment Agreement of $1.4 million and the Rand Road uptown corridor improvements.  Nonetheless there remains sufficient funds in the fund balance to provide an incentive of $1.3 million as negotiated to RPS Capital.  The attached Redevelopment Agreement outlines a schedule of TIF eligible costs for asbestos removal, roof replacement, and parking lot improvements.  The Redevelopment Agreement calls for contingencies such as evidence of financing, execution of a lease with the anchor tenant, the ability for a reduction in the TIF incentive if project costs are lower or revenues received are higher than estimated.  In addition, there is a commitment to façade and signage improvements.

Recommendation

It is recommended that the Village Board adopt the Ordinance approving the Redevelopment Agreement and authorizing the execution of the Agreement.