KANKAKEE — The investor who co-purchased two of Kankakee’s most iconic downtown office buildings earlier this year is stepping up in an even bigger way to generate substantially more development within the pair of properties.
Chicago area developer Doug Baum, who along with Kankakee developer Mike Pinski, purchased the PNC Bank building, 1 Dearborn Square, and Clock Tower Centre, 187 S. Schuyler Ave., which was the former Arcade building, has established a Qualified Opportunity Zone which could double the amount of money invested in the two properties.
Baum Investment Group, LLC, has established a federal $1.5 million “opportunity” fund. The attraction of an Opportunity Zone allows the investor not to pay capital gain taxes — the tax on the amount the property value has increased — making it attractive to investors.
The money in an Opportunity Zone can be used for sustainable residential, commercial and light industrial development in Kankakee’s historic downtown district. The development district boundaries are varied throughout Kankakee, but the Opportunity Zones make up more than 50 percent of all Kankakee property.
Among the area in Kankakee eligible for Opportunity Zone incentives are downtown, riverfront, Shoppes at Meadowview, Hobbie Avenue and areas near the Interstate 57 interchanges, 312 and 308.
“We are always long-term players in any community we are involved in and look to develop impactful properties that benefit the residents,” Baum said in a news release. “The opportunity zone is a great tool that incentivizes people to take an enduring approach with their projects. We plan to do some exciting and transformative work in Downtown Kankakee in the next few years.”
Opportunity zones, created in 2017 under the Tax Cuts and Jobs Act, are mainly located in lower income U.S. Census tracts. The goal is for developers to take advantage of the zone as well as other federal capital gains tax advantages. There are an estimated 8,700 Opportunity Zones nationwide. The Kankakee zone is only for the city of Kankakee.
Others interested in following the path of Baum and Pinski can also have a fund established. Funds can be used to rehab housing, buy an office building or can also be used as seed money for a business start-up.
Baum said this week plans are still being finalized on the downtown projects. He estimated that in a month or so he could have plans ready to share with the public.
He said there is no question extensive work regarding building rehab — interior as well as exterior — will be needed along with upgrades on the heating and air conditioning systems.
He estimated the PNC Bank building is 60-70 percent leased. The Clocktower, however, is about 30 percent occupancy.
There was early speculation a residential component could be included in the project, but Baum said that aspect would not fit with these structures.
“The highest and best use for these buildings is office,” he said. He said potential tenants continue to explore the buildings, but he hasn’t shown it to tenants seeking large amounts of square footage. He said the COVID-19 pandemic has changed the way clients look for office space.
Barbi Brewer-Watson, executive director of Kankakee’s Economic & Community Development Agency, said most often developers like Baum focus their efforts on major metro areas. The city, she said, is ecstatic a developer is putting money into a smaller community.
“This can put us on the radar for other developers. These people are always talking to one another. Having someone like Doug can only help us. The name ‘Kankakee’ can get into the rooms where these developments are being discussed,” she said.
Brewer-Watson is also hopeful local investors take advantage of this fund as well.
“The question becomes ‘How do we get local people to leverage their funds?’” she said.
Mayor Chasity Wells-Armstrong said development within the city’s core is extremely important in the Kankakee Forward plan.
“These efforts have allowed the city to leverage relationships between established business owners and investors to address their needs. I am excited to partner with Doug Baum and look forward to development that will meet the needs of local entrepreneurs and residents,” the mayor said.