Bids to buy McHenry’s historic Landmark School rejected by District 15 board. Now what?

Citing a contingency clause added by the high bidder for Landmark School, the McHenry School District 15 Board on Tuesday rejected both bids for the 131-year-old school that it plans to shutter later this year.

But whether a developer would purchase the historic building that is adjacent to the McHenry Riverwalk without contingencies in place is unknown.

“The contingency is the issue,” Superintendent Josh Reitz said at a district finance committee meeting preceding the school board meeting and vote. “What is more attractive to us is a bid without a contingency.”

The district received two bids for the school. Southfork Premier Properties LLC offered $20,000 but did not include a closing date or any plans for the property in its bid package, said Jeff Schubert, the district’s chief school business official.

Wauconda-based True North Properties Inc. offered the district $210,000 for the building with a July 31 closing date. The bid packet suggested converting the building into 20 one-bedroom and studio apartments.

True North’s bid packet also added that the “contract for sale is contingent upon the purchaser obtaining zoning approval for its intended use.” The sale would be canceled if the buyer could not get the desired zoning change from the city.

Therein lies the rub.

“We don’t feel [the contingency] is in the best interest of the district,” Schubert said in the finance meeting.

Because the school board rejected the bids, it can pass another resolution to restart the bidding process, Schubert said. He suggested True North – or any other interested bidder – should contact the city of McHenry to begin any zoning change and then rebid in the future.

Currently, the school building has a special-use permit and the land is zoned for office use. The city also has given the school landmark status, so it cannot be demolished, and any exterior changes must be approved by the Landmark Commission and City Council.

Getting a bid and sale without a contingency in place may not be a realistic expectation, others who work in the development and redevelopment industry said.

A contingency clause before a sale “is a common thing,“ said Allen Pepa of Geneva-based Allen Pepa Architects. He is not connected to Landmark School or redevelopment there, but he has worked with developers repurposing older buildings across the country.

“More often than not, any smart developer is going to put a contingency on the property, if there is a change in [zoning] use or a planned unit development. I wouldn’t put my neck on the line without ... a contingency,” Pepa said.

“When you have a contract on property like that, the owner is still the existing owner of the property and is nominally responsible for the rezoning, but the developer is doing all of the legwork and spending whatever money [is required] – for traffic studies, acoustical studies, engineering. It has to get pretty far along before zoning gets approved,” he said. “There is usually some pretty significant upfront costs” to get zoning changed – which a city can then deny, leaving the developer spending money upfront with nothing to show for it.

McHenry Mayor Wayne Jett said it makes sense for a buyer to request a contingency, particularly before coming to the McHenry City Council with a rezoning request.

“They are not going to want to spend all of this money and then have a multimillion-dollar building ... without then having approval of the city, anyway,” Jett said.

It isn’t that he or the City Council would be against zoning the land for residential use, Jett said.

“But what if another developer wants to put in a boutique hotel?” he said. That would require different zoning, as would retail or event space.

“We don’t want to change the zoning and then change it again” because plans or buyers change, Jett said.

His mayoral opponent in the April 1 election, 4th Ward Alderwoman Chris Bassi, has advocated for the city to buy the building for community use. She spoke about that desire after the school board’s vote.

No groups have come forward with an offer, plans or funding to make public use happen at the school.

Jett said now may be the time for District 15 and city officials to discuss what the building’s future could be, adding that he so far has avoided that so no one thought he was “in cahoots with the school district.”

“After last night, we will reach out to District 15 about sitting down and having a conversation,” Jett said.