Shodeen set to walk away from McHenry development agreement

Following a July 15 McHenry City Council meeting to hear about potential development plans for downtown and that board’s response to its proposals, Shodeen Group is set to walk away with its development agreement with the city.

Late Friday, City Administrator Suzanne Ostrovsky sent an email informing the council that the Geneva-based developer requested a refund of the earnest money it had paid for two properties near the former wastewater treatment plant site and its intention to cancel its “standstill agreement” with the city.

“This is definitely not what I wanted to hear on a call with city staff and Shodeen a few days after the proposal was given to council,” Mayor Wayne Jett wrote in a message to the Northwest Herald. “However, I don’t blame them after the way they’ve been treated by some of our council members.”

McHenry and Shodeen have been in talks for several years, looking to develop two downtown sites. In April 2023, they agreed to work toward a proposal by March 2025. That “standstill agreement” includes the 7.2-acre wastewater treatment plant site at 3302 Waukegan Road and 2.25 acres between Route 120 (Elm Street) and Green Street.

Since that 2023 handshake deal, the city and Shodeen began adding to the site footprints, purchasing land and buildings owned by Carey Electric adjacent to the wastewater plant, and came to an agreement to purchase the Green Street Cafe.

In early 2024, Shodeen came to the city with a plan outside but adjacent to that agreement, for the former City Hall site at 1111 N. Green St. By a 4-3 vote, the council turned down that proposal for 88 apartments, 157 shared parking spots and a commercial space in a six-story development.

Shodeen President David Patzelt also asked for $6 million in public assistance from tax increment financing, and an additional $2 million in direct grants for the $30 million project.

A call to Patzelt late Friday was not returned.

Following that proposal’s rejection, Shodeen was asked to present what it had in mind for the two parcels in the standstill agreement. What the board and the packed council chambers heard were concept plans for about 800 apartments, a 130-room hotel, commercial spaces and parking downtown.

While no voice vote was held at the July 17 meeting, the council indicated they were not in favor of Shodeen’s proposals.

Reached by phone or text message late Friday, several council members spoke about Shodeen’s decision to pull out of the agreement.

Seventh Ward Alderwoman Sue Miller, one of three who voted for the June 17 proposal, said “Shodeen was the right partner to help us develop, but the project was the starting point. It was not a project we could all get behind.

“Hopefully, we can revisit our relationship, because I do believe they are the right partner,” Miller said.

“I was not surprised, they are not getting what they wanted,” said 3rd Ward Alderman Frank McClatchey, who with the other dissenting council members and residents ”want to stand up for staying original and not have multiple complex apartments downtown.”

For 2nd Ward Alderman Andy Glab, the issue remains not only the density of the apartments, but the fact condos were not on the table. He also wants to see the council decide what redevelopment should be, not a developer.

“We are not Geneva or downtown Arlington Heights. We have a certain flavor and we want development ... within the parameters of what McHenry is about,” Glab said.

Fourth Ward Alderwoman Chris Bassi said the community took on Shodeen and won. “It is rare for a community to take on a corporate developer and win, and it is impossible to do without community involvement,” she wrote in a message to the Northwest Herald.

It is possible, McClatchey believes, that other developers will come forward for the downtown properties, too. “This will open the floodgates. We have the TIF money. [Shodeen] was asking for too much and we didn’t like it.

“A six-story building on Green Street was not going to work,” McClatchey said, calling the McHenry wastewater site a future “crown jewel of the Fox River. Let’s continue the townhomes. The whole point will sell like pancakes.”

Jett, however, worries that McHenry’s reputation has been tarnished. “It is essential that we are seen as a city that values and respects the time and investment of developers. I believe in treating developers/businesses with respect, even if you disagree with their plan. Unfortunately, we have encountered some challenges in this regard.”

He went on to call out Bassi and an opinion column she wrote for the Northwest Herald.

“She took a private executive session discussion and disclosed false information in the paper on the very day she believed she would be voting on the development. It was never a vote and more of providing feedback,” Jett wrote.

“This premature disclosure not only compromised the negotiation power of the developer but eroded trust between the involved parties,” he added.