For more than 30 years in some cases, valuable land on the periphery of O’Hare International Airport has been sitting fallow.
But that’s now changing under a Chicago Aviation Department program to develop the parcels, and millions of dollars are at stake.
Mary Rose Loney, the city’s aviation commissioner, made it a priority three years ago to begin generating revenue from the vacant land around O’Hare, mostly sites too small for additional runways and too far from the airport’s terminals for parking lots. The scope of her project grew when the city began acquiring a 365-acre former military site north of the airport in 1997.
Wednesday brought news of the first contract for some of the military acreage when UAL Corp., parent of United Airlines, announced it is moving 800 of its most senior executives to a new corporate headquarters to be built on a parcel of the former military site. The company’s 30-acre lease is the fourth contract since 1996 to develop parcels around O’Hare; Loney said the contract announcement is the first of several the city hopes to make this year.
“We are continuing to review proposals for an unimproved 25-acre site alongside Touhy Avenue on the north side of the airport, and for a two-acre parcel located in the terminal core area,” she said.
The city is paying $130 million to buy the military site from the Pentagon and subsidize the move of an Illinois Air National Guard unit. An Air Force Reserve unit that had been based at O’Hare was deactivated in 1997.
The Air Guard unit is being relocated to Scott Air Force Base. The city will begin securing possession of the land next year after an environmental assessment and cleanup are complete.
“I was the only mayor in the country supporting closing of a military base five years ago when the Pentagon began shutting bases,” said Mayor Richard M. Daley. “This is prime land.”
Under the deal signed with the city, UAL will pay about $653,000 annually in rent for the 30-acre parcel. The 25-year lease allows the airline to renew the lease for two 15-year periods. Every five years the rent will be adjusted based upon the producer price index. In addition, the company has taken an option on 50 acres adjoining the new headquarter site.
The lease terms are nearly the same as those signed last year by FDX Corp. for a $50 million distribution center it is building on a 50-acre site west of the new UAL headquarters.
Unlike many companies that now shop their headquarters to the highest bidder, UAL has not asked for any city tax concessions or other financial assistance to pay for the move.
Gerald Greenwald, chairman and chief executive officer of UAL, said the company will build an $80 million building on the site.
In addition to thousands of dollars in property taxes, Greenwald said, the company will pay the city’s head tax of $4 per worker per month.
UAL, the first firm to lease part of the 365-acre military site, “establishes a tremendous anchor to help us develop the majority of the military property,” said Loney.
Greenwald said the company hopes many of its suppliers, especially its technology partners, will join it on the airport campus.
In addition, Loney said she is hopeful that some of United’s Star Alliance partners, such as Germany’s Lufthansa Airlines or Air Canada, will build their U.S. headquarters on the former military site.
United, the world’s largest airline with 95,000 employees, has outgrown its world headquarters in Elk Grove Township, where it has been located for 35 years.
But only 800 of the 3,600 people currently working in 1 million square feet of space spread over several buildings at United’s world headquarters will be making the move initially to the new building at O’Hare.
Greenwald said there are no plans now to move additional employees, but the option to lease 50 additional acres will give the company the opportunity to move some or all at a later date, he said.
In addition to the UAL headquarters and Federal Express distribution facility, the city also has leased land for an 18-acre warehouse site with an airline parts distributor that is a joint venture of United, Lufthansa and Air Canada, and for a 50-acre freight forwarding center, where construction is to begin later this month on a 215,000-square-foot U.S. postal service building to handle international mail. BAX Global, Air Canada, DHL and Alliance Airlines already lease buildings at the forwarding center.
Loney said nearly 1,500 jobs have been created at the freight center since the first building opened in late 1996.
In addition, the airport’s 15-acre corporate and general aviation facility will be moved to the military site from a parcel just south of the International terminal.
UAL’s lease will go to the City Council next Wednesday for approval. It will be considered along with a recommendation to issue $36 million in Midway Airport-related revenue bonds, at least $14 million of which would be used to finance construction of a new U.S. Customs Service inspection facility at Midway. The bond issue was recommended for approval on Wednesday by the City Council Finance Committee.
The facility, to be built as a component of Midway’s new terminal project, would allow American Trans Air to operate international flights at the Southwest Side airport from Central America and the Caribbean.
ATA tentatively is planning 8 to 10 international arrivals a day when the project is completed in several years.
The new inspection facility “takes Midway to the next level,” according to Loney, who said that other airlines may choose to provide international service at the airport once it is built.
