South Side affordable-housing complex sells in $54 million deal – Crain’s Chicago Business

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With 36 units rented out at market rates and the rest designated as affordable—set aside for tenants who make 40% to 80% of the area median income—Lake Park Crescent sustains itself with what’s known in the affordable housing world as “lasagna financing,” with multiple layers of funding sources, including low-income housing tax credits, tax-increment financing, and loans from the city and state.

With so many government parties involved—the city, CHA, Illinois Housing Development Authority and the U.S. Department of Housing & Urban Development—the deal took patience and perseverance. Standard signed a contract to buy the property at 1061 E. 41st Place more than two years ago, said Robert Koerner, Standard’s chief investment officer. The Chicago City Council last September approved a tax-exempt housing bond offering to finance Standard’s acquisition of Lake Park Crescent.

“This is not for the faint of heart,” Koerner said. “There were just a lot of moving parts, a lot of approvals.”

Then there was the fire that broke out at a six-unit building within the complex just two months before the transaction was scheduled to close.

“As if the deal wasn’t complicated enough, we had to negotiate with the insurance company and Draper & Kramer” to figure out how to pay for repairs of the building, Koerner said.

But Standard made it to the closing table in May and has started a major renovation of the property that will cost $10.7 million. Under its deal, Standard has agreed to continue to operate Lake Park Crescent as an affordable property for another 30 years, reserving 112 apartments for low- and moderate-income residents. It will set aside 60 units for tenants with housing vouchers from the CHA.

Standard owns more than 14,100 apartments across the country, with several properties in the Chicago area, including Walsh Park Apartments, a 134-unit building in Wicker Park, and Maple Pointe Apartments, a 343-unit building in the Gold Coast. It also owns properties in Glen Ellyn, Mount Prospect and Elgin.

Building and acquiring affordable housing has become more difficult this year amid rising interest rates and construction costs. But Standard managed to lock in its financing for the Lake Park Crescent deal in March, before mortgage rates jumped, Koerner said. At higher rates, the firm would probably have had to restructure the deal, seeking more money from the city and CHA to finance it, he said.

In the end, Standard funded the acquisition and renovation with $27 million in tax-exempt bonds approved by the city and $14.5 million in low-income housing tax credits, Koerner said. It also assumed debt from the city, CHA and IHDA. The city and CHA also received payouts totaling about $7 million through the transaction; Draper & Kramer received nothing but collected operating cash flow and fees from the property over the course of its ownership, Koerner said.

Draper & Kramer built Lake Park Crescent on the former site of four public housing high-rises known as the Lakefront Properties, also known as the Horseshoe Buildings. The CHA demolished the towers in 1998. Koerner knows the property well, as the developer of Sullivan Station, the second phase of redevelopment on the property built around 2012.

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September 8, 2022 at 05:58PM

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