striped polo shirts Plan for Downtown makeover was born in Chicago
In Chicago for an urban development conference, the four had scheduled a meeting at 900 N. Michigan Ave. the offices of Urban Retail Properties, a publicly traded development company. Urban Retail executives took the URA team on a tour of their Downtown Chicago holdings. The highlight was Water Tower Place, a seven level vertical mall that at the time generated nearly half of the retail sales on North Michigan Avenue.
On the first floor were Lord Taylor and Marshall Field’s department stores. Glass elevators carried shoppers between floors. Connected to the shops were an underground parking garage, a 431 room Ritz Carlton Hotel and 40 floors of luxury condominiums.
As they walked along Michigan Avenue, which parallels the shore of Lake Michigan, they passed skyscrapers and a collection of upscale shops. Among the street’s ritzy offerings were Tiffany Co., FAO Schwarz, Crate Barrel, Polo/Ralph Lauren and Giorgio Armani.
Urban Retail executive Jim Czech pointed to the stores he thought would work in Pittsburgh.
At dinner, talk turned from Michigan Avenue to Downtown Pittsburgh. Back home, Mayor Murphy had a commitment from Lazarus to build a department store at Fifth Avenue and Wood Street. His larger goal was to support Lazarus with a revitalized retail district.
Murphy was not the first Pittsburgh politician to think that way. In the preceding two decades, Mayors Richard Caliguiri and Sophie Masloff proposed several renewal schemes for Fifth and Forbes avenues, but many of their ideas collapsed from oversized ambition or an uncooperative real estate market.
HOW MAYOR MURPHY PLANS TO PAY FOR MARKET PLACE AT FIFTH AND FORBES Urban Retail Properties, a Chicago developer, plans to contribute $179 million to the project.
Tenants of Market Place would be expected to provide $195 million for the outfitting of their stores.
The Strategic Investment Fund, a private pool of capital created by the Allegheny Conference on Community Development, would loan the URA $10 million.
Public funds would account for $53.5 million of the project costs, said URA Executive Director Mulugetta Birru. That includes a $17 million loan from the Pittsburgh Development Fund, a $10 million state grant, a $6 million URA grant,
$6.5 million in parking tax revenues from a new garage on First Avenue and two new underground garages built for Market Place, and $14 million in tax increment financing from the new Mellon Bank and PNC Bank operations centers.
To pay for the two underground garages, a nonprofit development arm of the URA would issue $27.5 million in revenue bonds. Birru does not consider that to be public money.
Street improvements costing $15.5 million would be paid with city capital budget money. Birru does not count that as part of Market Place’s public share because the work was to be done with or without the new project.
HOW THE $480.5 MILLION WILL BE SPENT
Acquiring property and relocating businesses $78 million
Demolition of buildings $13 million
Facade preservation $5 million
Construction of two underground garages $33 million
Street work $15.5 million
Construction of buildings $141 million
Outfitting the interiors of the new stores $195 million
HOW THE URA PLANS TO PAY OFF ITS MARKET PLACE DEBT
Because it will receive rent payments from the new stores, Urban Retail Properties has agreed to pay the URA a fee of $3.50 per square foot the first year of operation. The URA would use that to pay off $37 million in loans from the Pittsburgh Development Fund, the Strategic Investment Fund and Urban Retail Properties. If the developer can fill 600,000 square feet with new tenants, that would mean $2.1 million in fees for the first year. The fee would increase by 2 percent a year.
On this schedule, it would take the URA about 20 years to settle its debts. In reality, though, it will take longer. Urban Retail Properties has agreed to funnel some of its $3.50 per square foot fees to AMC Entertainment Inc., a Kansas City based company that wants to anchor Market Place with an 18 screen theater. The fees would be used to reimburse part of AMC’s city amusement tax bill. By law, AMC has to pay a 5 percent amusement tax on all tickets sold. Those taxes still would be paid, but Urban Retail Properties is willing to reimburse AMC for taxes paid on the first 1.5 million movie tickets sold. The cap on reimbursement would be about $300,000 a year.
Urban Retail, realizing the profit potential, was willing to help Murphy give it another try, according to several people who were there that night. As the sun disappeared over Chicago’s lakefront, they talked about the inevitable controversy of such a project.
Even so, “I don’t think the developer had a sense of how significant [the controversy] might be,” Frankel said.
The Murphy plan
What started that night in Chicago is now a $480 million plan to demolish and resurrect several key blocks in the Golden Triangle.
Mayor Murphy and Urban Retail Properties want to replace a string of old buildings with a collection of upscale eateries and boutiques. Shoppers would walk Fifth and Forbes avenues as they do the Magnificent Mile, entering each store from the street. Everything would be open late.