Original Entry Title: IN-district
Team code: 176272
School: Carnegie Mellon University

Overview (Narrative excerpt from final four team submission)

The IN-district is a strategy that preserves and celebrates the historic context of the Chicago North Branch area through a revitalization into a new riverside center for culture, innovation, and industry. By connecting light industries, maker spaces and innovation startups, educational spaces, and public amenities, The IN-district nurtures employment opportunities, as well as community growth. Pedestrian trails link the industrial blocks to mixed-use areas while providing access to the riverfront and weaving together the energy from both sides of the river. The three main gathering spaces of the site—INnovation Square, INdustry Square and INteraction Square– serve as hubs to foster collaboration and community. The overall goal of the IN-district is to revitalize the area by tapping into its original life source; to preserve and enhance the existing industrial activity in the area while evolving it into a vibrant and diverse community.

Design Narrative

The IN-district is a strategy that preserves and celebrates the historic context of the Chicago North Branch area through a revitalization into a new riverside center for culture, innovation, and industry. By connecting light industries, maker spaces and innovation startups, educational spaces, and public amenities, the IN-district nurtures employment opportunities, as well as community growth. Pedestrian trails link the industrial blocks to mixed-use areas while providing access to the riverfront and weaving together the energy from both sides of the river. The three main gathering spaces of the site—INnovation Square, INdustry Square and INteraction Square– serve as hubs to foster collaboration and community.

We are interested in the evolution of the student, professional or visitor to our site, who will go on to become a full-time user of IN-District. To achieve this mission, we have stratified the development phases keeping in mind the growth of the individuals that will use it at every phase.

Phase I: “INcreasing Current Interest” is devoted to introducing new programs that will bring vitality to the district. We create new interest by anchoring our presence along the North Branch, creating Gateways on both the East and West corners of southern border. We amplify this by establishing high energy uses like Production Hubs, Educational Centers, and a Hotel that are being developed in parallel to the site preparation occurring in Parcel A.

Phase II: “INtroducing Innovation” is strongly focused on establishing our identity as a holistic development that pays homage to its past. We develop new incubator and office spaces for start-ups, makers, and innovators. This rehabilitates one of the Fleet and Facility Management warehouse into an Indoor Market. By the end of phase two pedestrian bridges and the three public plazas are inaugurated. The bulk of our construction is completed during phase two development. Throop Street leads to INnovation Square, an area that facilitates the industrial and tech sharing economy by partnering with local industries to serve as the community incubator. The square offers shared office and workshop spaces for growing manufacturing start-ups and is the site for vocational-tech education, community hack-a-thons, and public galleries for new technology. INdustry Square, a highly visible cultural center functioning as the life source for the district, draws the community from the east bank towards the site.

INdustry Square connects INnovation Square with the rehabilitated Market to the South and the new mixed-use commercial and residential neighborhood to the North. Adjacent to the market, INteraction Square, a diverse cultural destination with commercial farming, food market, and food trucks, includes a culinary research space for Kendall College. INteraction Square serves as the beacon for the restaurant quarter within the district and transforms into outdoor entertainment and dining spaces in the evening. To the South, a production hub partners with local lighting and sound businesses, as well as DePaul’s Performing Arts Program to offer a sound stage for growing Chicago’s strong film industry.

Residents of the IN-district have a wide variety of housing options available to them. The residential program is designed to encourage the growth of innovation and entrepreneurship in the area with live-work lofts and studio spaces. Terraced mixed-use spaces with commercial-retail at ground level and residential units above, line the river to develop an urban scene that energizes the river. Twenty five percent of all apartment units and twenty percent of midscale condominiums are designated to be affordable homes for low-income families to maintain accessibility to the surrounding population and ensure a diverse community within the district.

The vision of IN-district is to revitalize the area by tapping into its original life source. By preserving and enhancing the existing hub of industrial activity in the area while evolving the community into a center for culture, innovation, and industry, the district will be able to maintain a balanced, viable and sustained economy.

IN-District is an attempt to give back to Chicago and its people its land and capitalize on the opportunities that follow. To make sure that this comes to fruition, we have partnered with a volley of educational institutions like Kendall Culinary College, DePaul University, Friends of the river etc. We are interested in the evolution of the people who will work in and visit IN-District into those that live in and use it full-time.

Financial Narrative

THE STRATEGY

The intent of IN-District’s financial structure is to deliver on the promises of the design intent in a real world scenario. We accomplish this by making sure we understand two critical points. The first is that our site is a valuable property that is currently underutilized. The second is to understand the motives and expectations of all stakeholders and investors involved. To address the second concern we have identified potential project partners in ‘Home Depot’ and ‘Sterling Bay’. While these relationships have a more design and strategy-based quality, they give us the opportunity to foster mutually beneficial tie-ups bound in a finance-based understanding. To address the first concern we have taken strategic steps to phase the development such that each is financially self sustaining.

PHASING STRUCTURE

The phasing has been structured based on the intent of each phase, as well as the real estate and financial implications. Aware of market interest in the area, we acquire all parcels needed for development in Phase I, including Parcel A, Home Depot, and the parking lot at North and Elston before prices rise. WCI will maintain and develop Parcels B and C, and purchase Parcel A from the city at market rate. The developer will utilize its land ownership of Parcel B & C- valued at $130/sq-ft & $135/sq-ft respectively- to gain an acquisition loan for the purchase of Parcel A valued at $130/sq-ft based on market value of adjacent parcels recently sold. We use an acquisition loan quoted at 50 bp above prime, or 4.5% over 20 years. Each phase will be financed with construction loans at 150 bp over prime (5.5%), converting to permanent loans at the end of the phase. Interest escalation is assumed to be at 10 bp annually. The IN-District project offers a Leveraged IRR of 29% and Unleveraged IRR of 15%. It is strategically divided into four phases that introduce a powerful and balanced mixed uses.

A JOINT VENTURE

A joint venture between the developer and the investor will be structured to guide the financing of the project. The developer will provide a 10% equity stake, and 90% will be provided by the investor. Profits are distributed using a waterfall with three hurdles: (1) cumulative preferred return 90/10 until the investor arrives at IRR of 10%, (2) Sponsor promote with an adjusted profit split of 85/15 until the investor arrives at IRR of 15%, and (3) 75/25 profit split for any profits generated in excess of the investor’s IRR of 20%.

PUBLIC-PRIVATE PARTNERSHIPS

Public subsidies amount to about $47 million (about 5% of total sourced funds) which come mainly from New Market Tax Credits and North Branch Tax Increment Financing for the development of 8,500+ new jobs, and for public use infrastructure. An amount of approximately $3 million from Low Income Housing Tax Credits (LIHTC) and about $2,000,000 comes from public grants that are facilitated by three main public-private partnerships: (1) Alternative Transportation Partnership – the developer collaborates with North Branch Works and Active Transportation Alliance, to pursue the TAP-L and CMAQ grants for bicycle infrastructure. (2) River Activation Partnership – Urban Rivers and the developer will team up to develop a natural and innovative river infiltration system, partially funded by Chi-Cal grant, as well as Our Great River Program. (3) Education Research Partnership – Kendall Culinary Arts and Depaul School of Cinematic Arts open educational facilities at IN District, partially supported by Chicago’s Community Land Trust’s GO grant.

THE “IN” VISION

In terms of zoning, the office-retail-housing mixed use areas in Parcels A & B are re-designated to a Planned Development (PD). Future development envisions collaborations with adjacent parcels: To the south, Home Depot serves as a landmark but also sets context as a hardware provider. The IN collaborates with this neighbor to propose an urban layout with roof parking. This offers opportunity for further commercial development. Additionally, The IN creates opportunities for Home Depot in terms of marketing their brand by creating events around hardware and gardening related events. To the east, a joint venture partnership is established with the scrap yard landowner as a vital step taken as part of the due diligence of the project. The land is remediated using municipal and state partnership for the deliverance towards public use as open space that records recycling and metal manufacture concepts along a trail. The universities that partner with the development to open their IN-branch will collect grants from their side. They could also use TIF for job training programs. The redevelopment project area continues to be well suited for industrial land uses given the existing patterns. The current and suggested zoning, and its close proximity to an excellent local and regional transportation network make it attractive to a variety of users.

Team

• Ernest Bellamy (Team Leader), Master of Urban Design
• Lola Ben-Alon, Ph.D., Joint program between the School of Architecture and Civil and Environmental Engineering
• Shannon Iacino, Master of Science in Sustainable Design
• Varun Patel, Master of Business Administration
• Shruti Srikar, Joint Master of Architecture, Engineering and Construction Management

Faculty advisers

• Donald K. Carter, Co-Chair Master of Urban Design Program

Final Four Submission Materials

• Final Four Presentation Board
• Final Four Pro- Forma

Original Submission Materials

• Presentation Board
• Narrative Summary
• Pro Forma