Case Study

Four Properties Preserve Affordable Housing

7 min read

‘Communities of Opportunity’ Are Rose’s Goal in Chicago

Jonathan Rose Companies is making a major push to preserve affordable housing in Chicago, acquiring hundreds of units in recent months, some financed by Low Income Housing Tax Credits, in an effort to create “Communities of Opportunity,” in these renovated properties.

Rose’s most recent large purchases include:

•    Barbara Jean Wright Court Apartments, 272 units in Chicago’s Near West Side;
•    Englewood Gardens, 167 scattered-site apartments on the city’s South Side;
•    Archer Courts, a 146-unit apartment complex in Chicago’s Chinatown; and
•    Jackson Park Terrace, 318 units across from the Obama Presidential Library on the South Side.

Englewood, Archer and Jackson Park Terrace were acquired through the Rose Affordable Housing Preservation Fund V, while B.J. Wright was acquired using Low Income Housing Tax Credits and state Donation Tax Credit investments.

According to Rose partner Nathan Taft, these four are among a portfolio that totals about 2,000 apartments that Rose has purchased since 2012 or intends to by the end of this year. This includes the forthcoming purchase of 51st and King Drive Apartments, which was one of the first LIHTC deals ever done in Chicago.

B.J. Wright, Archer Courts and Englewood Gardens were acquired from the Chicago Community Development Corp., a long-time Chicago developer of affordable housing that was winding down its business.

Taft points out the efficiencies that can be achieved by preserving older properties rather than developing new ones. He says that in some cities it can cost $1 million per unit to develop a new affordable project.

Englewood Gardens, by contrast, which is 12 scattered-site buildings containing 167 apartments, was acquired for just $10.7 million. B.J. Wright cost $17.5 million for 272 units, with $46 million in rehab work planned for the property.

Taft describes the work Rose is doing in the Windy City as building “Communities of Opportunity,” whose aims are to feature “connections to health, education, cultural and social services so residents can continue to be empowered in moving their community forward,” according to the firm.

For the residents of B.J. Wright, this Community of Opportunity includes a large (5,000 square feet) community center featuring “common spaces, a fitness center, a computer learning center and a large multi-purpose room. The renovation will also furnish in-unit Wi-Fi for residents free of charge to increase digital access in the community.” This community hub will also be the central site for resident services, events and property management.

As with many LIHTC deals, Barbara Jean Wright Court Apartments required the partnership of many organizations.

“Enterprise Housing Credit Investments contributed $25.3 million in federal tax credit equity while PGIM Real Estate Finance arranged a $46.9 million Federal Housing Administration 221(d)4 mortgage loan. Huntington National Bank is providing a $20.3 million construction loan. In addition, the City of Chicago contributed Tax Increment Financing in the amount of $4 million and Community Reinvestment Plan funds of $3.8 million.”

The financing also includes “Illinois Donation Tax Credits facilitated by the redevelopment’s nonprofit partner Community Opportunity Fund and purchased by US Bank to generate roughly $900,000 in additional funding,” the firm notes.

Taft specifically thanked B.J. Wright residents for their input. “The Tenant Council, together with input from alderpersons and community stakeholders, developed a series of priorities for the future of the property focused on preserving affordability, improving conditions in units, common areas and grounds, safety and security, better community space for the residents, etc. 

“We continued to meet regularly with the residents throughout the process and integrated their feedback into the scoping and design of the projects.” 

Potential gentrification was creating an obstacle to affordability that the preservation of Barbara Jean Wright Courts will negate.

“With the housing markets in the West Loop and Pilsen booming, all—including the Department of Housing and Urban Development, the City’s Department of Housing, the State, the alderpersons, the Chicago Housing Authority, the tenants and the tenant advocates—were united in our efforts to preserve this critical piece of affordable housing,” says Taft.

The vast majority of the 272 units will remain affordable for the next 50 years. A small number, 21, will be at market rate to give current market-rate tenants the chance to stay.

Forty percent of units will receive federal project-based rental assistance through HUD and another 30 percent will receive project-based rental assistance through the Chicago Housing Authority.

Rose notes the collaborative efforts of many partners, including residents, local stakeholders, the City of Chicago Department of Housing, HUD, the Chicago Housing Authority, PGIM Real Estate Finance, Enterprise Housing Credit Investments, Huntington National Bank and US Bank.

The apartments will be completely renovated, and tenants will be moved offsite temporarily as work is done on their units.

Skender Construction is the general contractor, Grund & Riesterer Architects, Inc. is the architect, Urban Relocation Services, Inc. is managing temporary relocation and Rose Community Management is the property manager.

At Englewood Gardens, the acquisition was structured as a joint venture with 5T Management, a local developer and property manager that will oversee day-to-day operations of the property. Taft says Rose and 5T are “aligned on values” that include the social impact of preservation work.

Rose is assuming a Freddie Mac loan and a loan from the city of Chicago on the project. But the purchase price itself was done without new public financing, with much of the acquisition and renovation costs paid for out of Rose’s own equity fund, Taft says.

Taft says Englewood is in a “disinvested” part of Chicago. Once a thriving part of the South Side, the neighborhood lost stores and banks and much housing due to abandonment and foreclosure in the years after 1968, he says.

“There’s a lot of room for infill housing,” he says, noting there are hundreds of vacant lots in the neighborhood.

The goal at Englewood Gardens is to provide “safety, security and energy efficiency” in the properties, which are a mix of elevator and walkup buildings.

Taft says the preservation of affordable housing is a focus of Rose Companies, as well as the city of Chicago, the state housing agency and the Illinois Housing Development Authority.

“Preservation has an important role to play,” he says. “It’s also a great opportunity to back a local developer and property manager.”

 Taft says the initial phase of work at Englewood Gardens includes approximately $6,605 per unit and is focused on:

•    Exterior wall, façade and exterior stair repairs;
•    Framing repairs;
•    Vinyl plank flooring in all units;
•    Plumbing repairs;
•    Kitchen and bathroom repairs and upgrades; and
•    Fire/Life Safety improvements.

More will be done later, though. “We are currently planning for a refinance, and at that time, subject to available proceeds, plan to invest more capital in the second phase of work,” Taft says.

Energy efficiency measures at Englewood Gardens will include work on boilers, corridor fixtures and water savings improvements.

Completion is expected in the first half of 2023. Taft says he expects no temporary displacement of residents. 5T will provide a suite of resident services for Englewood Gardens community members.

Jackson Park Terrace, a joint venture with Preservation of Affordable Housing (POAH) in the Woodlawn section of the city, is also a large development, with more than 300 units. The purchase price was $25.25 million.

Archer Courts cost $11.6 million in a deal with affordable housing developer Tony Fusco of CCDC. Purchase of the Chinatown property was announced this February. There is currently a large renovation underway at Archer that will target Enterprise Green Communities certification and is focused on upgrades to units and community spaces, improvements to mechanical and electrical systems to promote energy efficiency, repairs of the building envelope to prevent water intrusion and site work to enhance accessibility and security.

Mark Fogarty has covered housing and mortgages for more than 30 years. A former editor at National Mortgage News, he has written extensively about tax credits.