If the doors to a new Costco open as expected next fall at the corner of 26th Street and Harlem Avenue in North Riverside, most people will remember the deal the village made with the developer to seal it.
But they should also remember another deal — between the developer and the owner of another nearby property.
Through a historical quirk, the owners of the property at 26th and Harlem don’t have complete control over what can be built there. Even with the complete backing of the village, the Costco deal could have been held up forever by the owners of the North Riverside Plaza — the shopping center at the corner of Cermak Road and Harlem Avenue — if they were so inclined.
And Federal Construction Inc., the Montreal, Canada-based firm that has owned the North Riverside Plaza since the 1970s, wasn’t going to give away that right for nothing.
In the end, Monroe Investment Partners, which owns the Edward Don property at 26th and Harlem, agreed that it would pay Federal Construction Inc. $900,000 to remove a restrictive covenant that prohibited the construction of a department store on the Edward Don property.
Monroe is not coming up with that money by itself. Costco and the village of North Riverside are each kicking $300,000 Monroe’s way. Thus, when Costco purchases the property from Monroe Development Partners early next year, the land will be unencumbered by that restrictive covenant.
“Costco wouldn’t buy it without that restriction removed,” said Alan Saposnik, president of Tower Real Estate Services, which manages the North Riverside Plaza for Federal Construction.
North Riverside will pay for its $300,000 contribution by rolling that amount into the debt the village will issue to seal its deal with Monroe Development Partners.
According to Village Administrator Guy Belmonte, the village settled on paying Monroe $6.5 million to bring Costco to the Edward Don site. That figure was bumped up to $6.8 million to account for the separate deal Monroe negotiated with Federal Construction to remove the covenant.
The restrictive covenant, according to Saposnik, dates back to the mid-1960s, when the original owner of a huge piece of property — bounded by Cermak Road, Harlem Avenue, 26th Street and the north-south railroad spur — began selling off parcels.
First to go was the property at the corner of Harlem and Cermak, which became the North Riverside Plaza and the home of the E.J. Korvette department store. Part of that deal, according Saposnik, was a covenant that mandated no department store could be built on the remaining original property.
When Federal Construction bought the North Riverside Plaza in the 1970s, said Saposnik, “the covenant ran with the land.”
When the Edward Don Company bought the property at Harlem and 26th Street, the covenant was no impediment. The covenant, however, explains why the property that sits between the North Riverside Plaza and the Edward Don Company developed the way it did.
The shopping center where Tony’s Finer Foods is located was purchased in the 1970s by Simon & Associates, which also built the North Riverside Park Mall. While Simon was able to build multiple department stores west of the railroad tracks, it couldn’t build them east of the tracks, because of the covenant.
That land, as a result, became the North Riverside Park Plaza, which contained several small retailers and a Dominick’s grocery store. Simon divested itself of the plaza property in 2003.
In 2007, a real estate partnership controlled by the owners of Tony’s Finer Foods purchased the plaza property for $21.75 million.