City of Evanston's Wild $20.1 Million Dollar Lease for 909 Davis

$6 Million Dollars for a Build-out and 13 Elite Parking Spaces

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If you haven’t heard - Evanston is moving City Hall from the current location on Ridge to a spot in Downtown Evanston, at 909 Davis. City Council voted 6-3 to approve staff to sign the lease in January 2024.

The new City Hall lease was signed in February 2024, and starts on October 1, 2024. It includes 52,955 square feet over 3 floors. The owner of the building is a firm out of New Jersey, Red River Asset Management.

It’s a building

You can read a copy of the lease with Red River and the City here, which I obtained via FOIA Request. Over the life of the lease, the rent-alone cost to the city will be around $20.1 million dollars. This is a great deal for the owners, Red River Asset Management, who bought the building in 2023 for $27 million dollars.

Here’s what the annual breakdown looks like per year, which includes the additional taxes and Operating Expenses the City will pay on the property. All in, over the course of the 15 year lease, the City will pay nearly $35.2 million dollars.

The leasing agents on this deal (JLL) will probably also do well and stand to make over a million dollars over the life of the deal. I reached out to them since my prior story and received no response.

Elite On-Site Parking (not for you)

The deal doesn’t include any parking for City Hall visitors, which will be provided at the city-owned Sherman Plaza Parking Garage. The walking distance from the Sherman Plaza Garage to the new City Hall office is about 500 ft. ¹

However, the lease does include 13 on-site parking spaces (below the building) and for five (5) of these spaces, the City will pay initial rate of $100 per month per space, plus taxes. It’s unclear who these spaces will be assigned to.

$5.96 Million Dollar Build-Out Allowance

The craziest thing about the lease is the build-out allowance. I’ve really never seen anything like this before. According to the lease, the build-out will work according to the following sequence:

1. Space Planning: Red River provides a space planning allowance of $6,354.60 for a preliminary test-fit drawing and $3,177.30 for one revision. Tenant (City of Evanston) reviews and approves the space plan.

2. Plans and Specifications: Red River prepares detailed Plans and Specifications for the build out. The City has 5 business days to approve or disapprove these plans.

3. Contractor Selection: Red River solicits bids from three commercially qualified tenant finish contractors. City of Evanston selects the Contractor from the bids received.

4. Cost Estimation: Red River estimates the total cost of the build out. The Allowance is $112.50 per square foot x 52,995 square feet - this is a $5,961,937.50 dollar build out allowance.

5. Construction: Red River manages the construction process. Work must be done by union contractors. Red River pays the contractors and other service providers directly.

6. Settlement of Allowance: Red River credits the Allowance (see #4) amount against the cost of the build out. If it goes over, then the City owes the difference. If the build out costs less, then the City will be rebated the difference in the form of rent discounts.

Red River gets to pick whatever contractors they like and the city picks from three. I asked the city about this and they confirmed.

The landlord is required to seek three qualified bids. They, in fact, sought four. City staff participated in interviews and reviewed proposals. The landlord and staff were in agreement on the selected contractor.

There is no requirement in the lease for city staff to select the lowest cost bidder. There is no RFP process, public notification requirements, or anything like that. The landlord picks three (or four in this case) contractors and then the staff picks who they like.

The cost of the build-out matters because if the build-out comes under budget, then the City gets a rebate applied against their rent. Here’s the exact language below.

In addition, Tenant may elect to apply any portion of any Unused Allowance not to exceed the Allowance Cap against Base Rent and Additional Rent due after the expiration of the Abatement Period (provided no Event of Default exists), by delivering written notice to Landlord thereof no later than by the date that is the last day of one (1) full calendar month following the Commencement Date.

Questions to the City

I posed a few questions to the City of Evanston. I included their response in full, which essentially argues that since City Council approved this, and it is a private landlord that standard best practices and procurement policies do not apply.

Tom: Will the Council be involved in selecting the qualified bidders and contractors? The city council approved the lease, which defines the contractor selection process. Staff provided substantial input on the selection of the general contractor. Staff will provide additional updates to the city council in September.

If not, what processes is the City implementing to ensure that the bidding process follows best practices such as conflict of interest requirements, equal opportunity laws, transparency laws, prevailing wage rules, and the city's own ordinances regarding awarding contracts over $25,000?

City’s reply;

City: City staff requested, and building ownership agreed to require the selected contractor to pursue best efforts to hire MWEDBE subcontractors/vendors. 

City staff requested, and property ownership agreed to seek bids from multiple contractors (four) and allowed city staff to participate in contractor interviews. Important decision factors include estimated construction cost, experience with similar projects, firm reputation, and reference checks/verifications.

Tom:

I'll be honest, this certainly seems like a loophole to circumvent the standard process the City uses for awarding contracts. Can you help me understand the argument for why it is not? What processes are in place to ensure a contract awarded isn't in violation of IL conflict of interest laws or bidding rules? 

From my reading of this lease, there is absolutely no incentive to use the build out allowance judiciously. A failure to do so impacts the city financially because the leftover funds are returned in the form of a rebate. Lowest bidder rules ought to apply here. Can you help me understand why they do not?

City’s Reply:

The City Council approved the lease, which outlines the buildout process and defines the budget. The lease item was discussed publicly multiple times. Even though staff approached this process with typical best practices, city procurement policies do not apply to privately owned property.

By this logic, if a public body wanted to avoid having to deal with bidding rules, all they would have to do is award a lump sum contract to some private entity to do it all for them.

For instance, District 65 is putting out bids right now for various parts of construction on the Foster School - but by this logic - why even bother? They could give the construction manager (Cordogan-Clark) a lump sum $48 million dollars and wash their hands of the whole thing. And if they wanted to hire their cousin Sal to do all the construction, we’d be none the wiser. ²

Should the City be required to follow standard lowest-bidder procurement rules in this case? Let me know in the comments what you think.

1. RIP Grandma when it’s February, icy outside and the CTA hasn’t plowed the sidewalks over there yet.

2. On top of this, I would argue there is a massive equity issue here too. How do we know that Red River is reaching out to Black-owned or Women-owned businesses as part of their due diligence or bidding process, which I thought was a City priority. There’s absolutely no way we, the taxpayer, could know.