Chatham Ridge: further developments in the malling of Chicago | Neighborhood News | Chicago Reader

Chatham Ridge: further developments in the malling of Chicago 

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On a 13-acre plot of land at 87th Street, just east of the Dan Ryan Expressway, lies the future of economic development in inner-city Chicago.

It's a shopping mall--or it will be just as soon as all the trees are planted and the stores stocked. Chatham Ridge has 700 parking spaces, a bank, a children's store, a Ford dealership, a large electronic-appliance store and a grocery market, as well as several boutiques, salons, and fast-food joints.

The mall is supposed to create about 450 full-time jobs and generate about $400,000 a year in sales tax and $500,000 a year in property tax. And, oh yes: it's subsidized by the city. Its presence will no doubt cut into the business of smaller strips in the neighborhoods nearby, but such are the hazards of development in the city. Nearly all interested parties are ecstatic over the mall.

"We're very proud of what we have done; we have shown that development can occur in the inner city and on the south side," says Charles Markopoulos, vice president of First National Realty & Development Company, which developed the complex. "We think this shopping center can serve as a model for others."

The local alderman is almost as upbeat. "Are there some drawbacks? Yes. Is it perfect? No. But the positives outweigh the negatives," says 21st Ward Alderman Jesse Evans. "This shopping mall is economic development, and that means expanding your tax base and putting people to work. That's what it's all about."

Almost all observers have agreed for the last several years that the land should be developed. It's situated in Chatham, a stable, middle-class black neighborhood whose residents make enough money to support a shopping mall and then some.

"The area is underserved," says Markopoulos. "Most of the residents around here have to go to Evergreen Plaza [in suburban Evergreen Park] to shop. The city's getting clobbered because it's losing their sales-tax dollars."

Just north of the mall are the factory and headquarters of Johnson Products Company, the manufacturer of hair products and cosmetics whose founder, George Johnson, once owned the land on which the shopping center is built. Johnson ran his business's warehouse and distribution center there, but by 1986 he wanted to sell.

"Johnson had a 220,000-square-foot concrete distribution facility there," says Markopoulos. "They must have had 48 to 52 concrete-reinforced truck docks. But time has a way of making certain factories obsolete. The former facility was just that--obsolete. It was too bulky."

The fact that First National would have to demolish the distribution facility added to construction costs for the mall. But Markopoulos figured that the site's promising location more than offset this drawback. The expressway promised a steady stream of traffic, and across the street was another, smaller complex, anchored by a Jewel food store. With the right mix of retailers, Markopoulos didn't think he'd have difficulty finding backers.

Before you get financing, you have to have your tenants in place," says Markopoulos. "Without them, it's difficult to find someone to back you." The most attractive kind of tenant is a store that's part of a successful national chain. But many residents near the shopping mall prefer stores that are locally owned.

"People feel that a local business will hire local people," says Evans. "There are always concerns with a development like this that the community will be overlooked. You have to watch out, or the community won't get any jobs, or only the lowest-paying jobs. There's always the likelihood that the quality jobs will go outside the community. As much as possible, you want to keep dollars in the community. We made our concerns clear to the developer very early on."

At a series of meetings with politicians and community groups from the area, Markopoulos promised to rent space to locally owned businesses.

"To get financing, we need to fill 30 to 50 percent of our retail space with what we call 'credit tenants,'" says Markopoulos. "A credit tenant is someone with a history of success whose name means something to a financier. It's someone who will make the financier say, 'Oh, this guy makes money. I can lend on him.' The nationals are credit tenants; they're triple-A investment. On the local level, you have to meet with the individuals one-on-one to see if they have a business sense and to determine if they will last."

Aetna Life & Casualty Company agreed to back the project, provided the city kick in with some help. So Markopoulos went to the city's Department of Economic Development, seeking a financial boost called tax-incremental financing. With TIF, the city borrows money to help finance the project, then repays the loan with the increase in sales- and property-tax revenue brought in by the project. In this case, Markopoulos asked for a $3.1 million TIF.

It was a gamble for the city--any TIF is. If the development flops, the city has to repay the loan with money from general revenues, and that means less cash for such essential citywide services as street repairs, the Fire Department, and the Police.

There are also political reasons for opposing any kind of TIF. By and large it's a subsidy for the rich, enticing developers into inner-city neighborhoods. And city officials ought to ask themselves why local government should squander the few resources it has on people who need the money the least. Neither Aetna nor First National is poor. First National is one of the largest developers of shopping centers in the midwest. Its founder and president, Demetrios Dellaportas, is a millionaire, whose rags-to-riches success story is a legend in the business: he began his career when he converted his in-laws' fruit and vegetable shop to a laundromat.

And what about the undesirable effects of increased competition from a subsidized mall? The old-fashioned business strips along 87th and 79th streets, dominated by ma-and-pa storefronts, will inevitably lose business. Already many storefronts on the south side are abandoned, and fertilizing the development of new shopping malls will only hasten the decline of other storefronts.

On the other hand, in a city desperate for development, most city officials apparently feel it's a risk worth taking. The city is not the kind of area where developers battle each other for the right to build, as they do in Du Page County. Inner-city Chicago is starved for investment; the tacit attitude of economic-development officials here is to take what little they can get.

"A project like this won't be possible without a TIF," says Markopoulos. "First of all, we had to knock down the old structure, so that raises our construction costs. We can spend $5 to $15 a square foot just clearing a site."

Second, the TIF means that there's more money to go around. Aetna will have to contribute less to finance the project, and First National can boost its developer's fee.

"The TIF increases the developer's profits, no doubt about it," says Markopoulos. "And this is a profit-motive business. That's what it's all about--you have to make a profit. Without the TIF, there's no profit. Without a profit, you're kidding yourself if you think this [mall] gets built.

"You also have to think about Aetna. Aetna considers this project too risky without the TIF. Their loan-to-value ratio is too high. In other words, they will have put too much money into the project for what it's worth. Without the TIF, if one or two tenants go under, Aetna will immediately start losing money. With the TIF, they have to invest less money; their risk is reduced. So they won't lose money if one or two tenants close."

In 1986, the City Council voted to approve a $3.1 million TIF for the shopping mall. Aetna came through in turn with most of the remainder needed for the $22 million project. After that, Markopoulos's job was a matter of getting the leases actually signed.

"There's money to be made in the inner city--most of the more sophisticated retailers know that," says Markopoulos. "Silo [appliance stores] opened a 188,000-square-foot facility in the mall, and they are doing very well. We have a deal with Bonnie Brook Ford that's very unique. It's one of the first times you've had an auto dealership alongside retailers. They had a dealership at 55th and Ashland, and they were looking for a larger facility. They looked in the suburbs, but we were able to attract them here.

"We also got Montgomery Ward to come here. It's part of their concept to take departments from the larger store and spin them off as freestanding businesses in the neighborhoods. The Ward outlet in this mall will be a store for kids."

Unfortunately, Markopoulos--like any other developer or economic planner in the same situation--has no plans to revitalize the neighborhood strips, like the ones on 87th Street. Few would even try. Developers are in business to make money, they're not social workers. Neighborhood business strips will survive in communities like Old Town, where the locals have enough disposable income to drop a bundle on designer shoes and clothing. That's not the case in Chatham, and it's even less true in poorer south-side communities like Englewood and Woodlawn.

"I came to Chicago from Greece when I was eight," says Markopoulos. "I still live here, and I love it here. But the fact is that consumers set the trends. And for years, consumers have been driving past these neighborhood strips to get to the suburban shopping malls. They've made it clear: they need convenience. They need off-street parking. That's the way it's been, and that's the way it will be.

"To stay in business you have to give the people what they want. That's what we're doing with malls like this. And I say it's time we did that in the city, instead of just losing business to the suburbs."

Art accompanying story in printed newspaper (not available in this archive): photo/Jon Randolph.

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