Sunday, May 25, 2008
U of C: Guardian Angel, Despot, or Sucker?
posted by Peter Rossi
In recent years, our favorite (and only) neighborhood university has gone on a buying binge. First, Doctor's Hospital and the Hyde Park Theatre and related buildings at 53rd and Harper. Then a multi-million dollar bail-out of the Co-Op. This was followed by the purchase of the radioactive Harper Court. Most recently, another transfer payment to take over the Chicago Theological Seminary.
All told, these various purchases and subsidies are close to topping the $75 million mark. We haven't seen this kind of activity since the old Urban Renewal days. It mirrors work that other universities are doing.
The Guardian Angel
There has always been a sense in which the U has been the buyer of last resort for HP, somewhat like the Federal Reserve. If things get bad, we can always count on the U to bail out the neighborhood. The Hyde Park Theater building is a case in point. Neighborhood theaters are a thing of the past (why settle for one screen when you can have your choice of 15 at AMC with parking too!). It was clear no one would buy this abandoned building. So along comes the U, patiently plunking down its millions and engaging a top notch developer to make something of the old Cinema Paradiso.
The same story was played out with Doctor's Hospital. Who is going to spend $50,000 a year to send the kiddies to the U and feel good about it when you can't even stay near the campus? The various units of the U spend millions each year to feed and house visiting faculty and speakers in downtown hotels. It seems very logical to build a hotel on the site of this eyesore. An auction was held and guess who suffered from winner's curse? This whole deal has gone sour as local NIMBYs hid behind preservation and labor issues to stop the U dead in its tracks.
Harper Court has suffered from NIMBY attention. The HP-KCC (in the person of its "preservation task force") rushed in to control this development under the assumption that there would be a long list of suitors willing to develop under the most intrusive conditions. No one was stepping up to the plate, so again our white knight reached into his wallet.
We have been over the Co-Op many times here in this blog. But the bottom line is that the University forgave past due rent and satisfied the Co-Op's creditors with bushels of cash. Again, one could argue that this was absolutely critical for the neighborhood and the U. Who would live in a neighborhood without a functioning supermarket, however great Peapod is?
The latest and largest (more than $40 million) investment is the take-over of the Chicago Theological Seminary at 58th and University. These buildings will house the new Milton Friedman Institute (there is even a chapel to worship the free market!). It is easy to make the argument that this is a great deal for the university. The CTS buildings are right in the middle of the campus and are also very striking. The Milton Friedman Institute is a smart move to attract donors who want to honor Milton and the economic principles that, as the Wall Street Journal put it, let the University of Chicago win the Cold War.
This flurry of activity and huge investment is sure to stir up our local conspiracy theorists. The U is an evil empire that reveals an arrogance that makes Bill Clinton look bashful. The U will only pay lip service to community input. The U and its wealthy donors will build academic temples inlaid with gold and tony shops to satisfy the temporary residents (students) and fussy faculty.
The problem with this theory is that it presupposes that the incentives of the University are different from that of the community. This is clearly false. It is very much in the interest of the University to have a vibrant neighborhood. Those who think that the University only wants luxury condos and expensive shops are woefully ignorant of the U payroll. Thousands of staff members and graduate students pull down modest pay and want to live in our neighborhood.
Never Give a Sucker An Even Break
My biggest worry about this latest spending spree is that the U won't pull it off. The U has an spotty track record in managing and developing commercial real estate.
A review of a few recent episodes is in order. A prime example is the Hyde Park Theater mess. As the Herald reported this week (yes, friends, once is a blue moon reporting can be found there), the U has just fired the developer for this parcel. This is worth thinking about as this developer (Brinshore and Baum) has an excellent reputation. However, it doesn't take a rocket scientist to see that the whole idea of developing the Theater site is flawed. 53rd street is not Damen Ave. It can barely support a collection of marginal shops (HPP and Freehling Pot and Pan, notwithstanding). Where are the customers going to come from to browse the cute boutiques this development was to feature? The immediate central Hyde Park neighborhood doesn't have enough customers, with enough income to support specialty shops. Either you have to attract customers from elsewhere (but you need to provide parking) or you have to increase the number of residents.
Perhaps, the U fired the HP Theater developer in order to coordinate with the development of nearby HC. However, this does not explain why they chose to start this process with Brinshore and Baum in the first place. Local NIMBYs have been effusive in their praise of the HP Theater development "process." The fact that it proved to be another dead end keeps up their dismal track record.
The Co-Op fiasco is a lesson in commercial real estate management as well. In 1999, the Hyde Park Shopping Center (owned by U of C) was renovated and Co-Op signed to a long-term lease. The plans for renovation were singularly lacking in ambition and mass. There just aren't enough stores in the center to attract customers. The Co-Op footprint is way too small to attract the interest of major chains. Finally, we all know how Whole Foods was shown the door!
There are other examples. There have been all sorts of failures in attracting restaurants to the "golden rectangle." Any one can see the reason (even Hans Moresbach gets it) -- the precinct is dry. This needs changing before you start subsidizing restaurants.
There is also a real concern that the U is not very savvy in negotiating real estate deals. Harper Court and the Shoreland are cases in point. The U paid 6.6 million for HC and sold the Shoreland for a song. The 6.6 million is more than other developers have offered for HC. And these other offers were made in heady times of inflated real estate values. A search of Cook County records tells the tale of the Shoreland. The U sold the property to a developer in 12/04 for $3,750,000 (based on tax stamps). The developer flipped the Shoreland for $10,000,000 in 9/06.
In the end, the success of the U in bringing about a change in our neighborhood is critical for us all. I hope President Zimmer is thinking long and hard about bringing more expertise in commercial real estate to bear on these critical developments. But this is not all, there has to be a concerted effort to increase the density and population of Hyde Park. This means supporting large scale residential development in East Hyde Park and elsewhere.
We can't afford to develop the reputation as the only prime area in Chicago that actively discourages development. We all need to do a better job of selling our local officials on change and making the case that the 50 cranks who show up at "community meetings" don't speak for us all. The U needs to step up and be counted on this one.