McHenry cancels $2.8M land deal for scuttled plans for hotel, 500 apartments downtown

Agreements approved in April for the city of McHenry to purchase property on Waukegan Road adjacent to the former wastewater treatment plant have been canceled by the McHenry City Council.

The council voted unanimously Monday to cancel its contracts to purchase the Carey Electric properties at 3309 and 3407 Waukegan Road, and a multifamily building also owned by the Carey family at 3311, 3313 and 3315 Waukegan Road.

The $10,000 in earnest money put down by the city also will be returned to McHenry, City Administrator Suzanne Ostrovsky said.

McHenry entered into a sale agreement with the property owners as part of the city’s plan to amass additional property adjacent to the wastewater treatment plant at the far east end of Waukegan Road. The land sits on the west bank of the Fox River, and the city paid almost $1 million in 2021 to demolish the decommissioned plant, leaving about 7 acres for development.

Working toward development there, the city entered a “standstill agreement” with Geneva-based developer Shodeen Group LLC in April 2023. McHenry promised to not market available downtown properties to other interested groups while working with Shodeen to come up with a satisfactory plan for the wastewater site and another 2¼ acres between Green Street, Route 120 and Boone Creek.

Shodeen presented a concept plan for both properties at a July 15 city meeting, including apartments and a 130-room hotel at the wastewater site, that the council indicated it was not interested in pursuing. Two weeks later, Shodeen indicated that it was ready to walk away from its agreement with the city. City staff expects a motion to officially terminate that agreement at the Oct. 7 City Council meeting.

“After Shodeen went away, we believed the city wanted to cancel the contracts” for the additional Waukegan Road properties, city attorney David McArdle said.

The contract had the city paying $2.8 million for the additional property, with plans to assign those contracts to Shodeen once a development was finalized, Ostrovsky said.

City staff met with representatives of Carey Electric and the multifamily properties who also requested cancellation of the sale contract, McArdle said.

Second Ward Alderman Andy Glab asked that the final documents note that the Carey family asked for the contract’s termination, “not just that the city canceled it.”

The wording was agreed upon by both sides, McArdle said, and any changes to the language would have to be approved by Carey representatives, but he added he would inform them of the request.