In a new bid to revitalize an area just north of its campus, the University of Chicago is subsidizing the mixed-use project, known as Harper Court, through various forms of assistance.
The university is selling land to the developer for $1 million that it bought for about $9 million; it is guaranteeing the $22 million construction loan on the 130-room hotel; and it is leasing the full 150,000 square feet of office space. Further, the city of Chicago is putting in about $20 million in a subsidy that comes from forgone future taxes on the site.
The moves provided the spark for a development that wouldn't have occurred otherwise, in a neighborhood long eschewed by investors. A formal groundbreaking occurred earlier this month at the site in Hyde Park, a neighborhood filled with students, university staff and faculty. By and large, poorer neighborhoods surround it, and large new private developments have been few and far between.
The university has a history in Chicago of steadily expanding its campus with new dorms, labs and classrooms. But that isn't what's behind this foray into the real-estate investment arena. Rather, it is being fueled by a desire to make the area around its campus more attractive to its students and faculty.
"We're not trying to flip these properties for profit," says David Green, executive vice president at the University of Chicago. "We're trying to really help invest in a way to spur development in the area."
Taking the role of both master planner and pioneer investor, universities in economically struggling urban areas have increasingly taken the lead on commercial developments to improve the livability of their neighborhoods.
Harper Court, on 53rd Street, is a historic retail strip, dotted with a hodgepodge of retail outlets, from banks to a mattress store. Its Valois Cafeteria, a classic neighborhood eatery, has occasionally been visited by President Obama upon his returns to Chicago.
But the university has higher aspirations. "It hasn't been a great neighborhood street, or a real destination where there's an interesting mix of shops and services," says Mr. Green.
Elsewhere on 53rd Street, the efforts of the school are aimed at renovating older buildings. Earlier this year, it began renovating an old movie theater, and it leased a storefront it owns to a 24-hour diner.Based on the tall cranes and fencing around the Harper Court lot, and the spiffed up Herald Building now home to Five Guys, so far things look like a good bet. The kind of bet that probably should have been made a long time ago.
"You have a real healthy combination of interesting development opportunities and good buildings with interesting space," says Josh Sirefman, a consultant for the university on the revitalization and a former New York City economic development official.