Costco made its purchase of 16 acres at 26th Street and Harlem Avenue in North Riverside official on March 12, clearing the way for a new store to open at the site in the fall.
The sale was supposed to close on March 7, but it was delayed by Costco until the company received a letter from the Illinois Department of Transportation related to access to the site.
“They needed a letter from IDOT that everything is in order on IDOT’s side because they have not issued their permit yet,” said Sue Scarpiniti, finance director for the village of North Riverside.
Costco paid $5.5 million for the land, which is part of a 20-acre parcel that formerly housed the Edward Don Company. Four acres fronting Harlem Avenue are still owned by the real estate partnership that bought the entire parcel in 2007. That land will be developed by the partnership as four outlots.
The land sale paves the way for the demolition of the old Edward Don warehouse. Costco already has local approval for demolition. The company is still waiting for its permit from Cook County.
Workers are presently removing asbestos from the warehouse. That work must be completed before demolition can move forward. According to Scarpiniti, Costco is still shooting for an October grand opening.
A critical component of the land sale was the participation of the village of North Riverside, which pledged $6.8 million to the real estate partnership that owned the property to help limit their loss on the sale.
In the end, the village ended up paying the partnership $6.3 million, according to Scarpiniti, “because of changes at the closing between the owner and the mortgage holder.”
Most of the $500,000 the village retained is being kept in a reserve account to make the first debt service payment on debt certificates sold by the village last week to raise the money it needed to bring to the closing.
According to Trustee Hubert Hermanek, a portion of that savings was used to seal a deal to create a second, dedicated eastbound turn lane on 26th Street into the Costco property.
The village went ahead with its debt certificate sale on March 7, the original closing date. In total, the village received a little more than $6.9 million in the sale, which reportedly drew interest from several investors.
North Riverside paid $164,800 in fees associated with the sale, including payments to its bond counsel and underwriter. The village also purchased $28,000 in bond insurance due to Moody’s recent downgrading of the village bond rating.
The debt certificates mature in 2032 and interest rates vary between 2 and 4 percent, said Scarpiniti. The village’s annual debt service payment will average about $400,000 per year, she said. If the village takes the full 20 years to repay the debt, it will have paid about $2.8 million in interest.
Sales tax revenues generated by Costco are expected to pay the debt service. Village officials have said that sales taxes from the store will more than cover that annual obligation.
Because there is a three-month lag between when a purchase is made at a store and the state remitting the local share of sales taxes, it won’t be until January 2014 — if the store opens in October — that North Riverside will begin seeing sales tax revenues from Costco.
The village will get its first look at exactly how much Costco is bringing to the village in sales taxes in June 2014, according to Scarpiniti, when the state releases a confidential report that breaks down sales tax revenues by retailer.
“But I’ll have a general idea of how sales are trending well before that,” she said.