Rosenwald Courts Reborn

6 min read

Former home of Nat King Cole and Joe Louis saved from the wrecking ball

After more than a decade’s abandonment, a beloved Chicago landmark has come back to life.

“It is really a neighborhood treasure,” said Virginia Pace, president of the Lightengale Group.

She is talking about Rosenwald Courts, which welcomed its first new residents last year after more than a decade as a vacant shell in the heart of Chicago’s Bronzeville neighborhood.

Those residents include families and seniors who moved into Rosenwald’s 239 refurbished apartments, in addition to small businesses that have signed leases in Rosenwald’s 15,000 square feet of retail space and 40,000 square feet of office space.

Reviving the 1920s landmark took $134.1 million from a long list of financing sources.

“I’ve never seen a financing structure this complex and this layered,” says Mark Risch, director at Citi Community Capital, which provided Rosenwald’s $58.6 million, tax-exempt construction loan.

Rosenwald’s famous history
The complex gets its name from Julius Rosenwald, one-time president of Sears, Roebuck & Company. He developed the community in 1929 as the Michigan Boulevard Garden Apartments, filling nearly an entire city block of the bustling neighborhood.

It became a magnet for Bronzeville’s growing African-American middle-class. The 429 apartments were home to celebrities, like singer Nat King Cole, boxing great Joe Louis and Olympian Jesse Owens.

Over the years, the property declined along with the neighborhood. The last residents evacuated in 2000 after a gas leak. As weeds grew tall in its two-acre central courtyard and rainwater tunneled through the walls, the complex passed from owner to owner.

Some neighbors of the crumbling giant demanded demolition, even though it is a protected historic landmark. The National Trust for Historic Preservation put the Rosenwald on its “Most Endangered” list.

Local leaders – like Chicago Alderman Pat Dowell – fought for years to save the crumbling, Jazz Age buildings. Finally a workable plan came from a partnership between several developers: Lightengale Group, Iceberg Development, Goel Investments, RCAP, and Roos Enterprises.

Based, in part, on Alderman Dowell’s suggestions, the redevelopment lowered the number of apartments. The new Rosenwald Courts has just 239 apartments.

New elevators and hallways account for some of the reduction in apartments. The redesigned Rosenwald links its 59 attached five-story buildings with these corridors.

The 429 apartments at Rosenwald were originally piled into attached, five-story buildings with no elevators. However, renters in Bronzeville are simply no longer willing to climb five stories – even for an affordable apartment.

Redevelopment also converted some residential space into 40,000 square feet of new office space. Bronzeville have very little other modern office space so local businesses have already claimed 5,000 square feet.

“We expect to fill the offices over the next five years with smaller tenants,” says Pace.

All these changes to the landmark building could have created conflicts with the biggest piece of the financing for the $134 million redevelopment.

Equity investor The Richman Group paid $61 million for a package of four percent Low Income Housing Tax Credits (LIHTCs) and Federal Historic Rehabilitation Credits.

The officials who oversee the Historic Tax Credit program must approve any changes, no matter how slight, to the landmark buildings they help finance – like carving out new entrances or adding new elevators and hallways.

“They gave us more leeway than is normal,” says Pace. The Rosenwald could not have been saved, however, without major changes.

Chicago steps up to finance Rosenwald
The City of Chicago put a huge amount of precious local resources into the redevelopment – thanks largely to neighborhood advocates like Adlerman Dowell.

Chicago provided $25 million in tax increment financing. Local officials also provided an initial $5 million in federal Neighborhood Stabilization Program funds and $3 million in Illinois Donation Tax Credits.

To bring more funds to the redevelopment, Rosenwald also found a way to participate in the Chicago Housing Authority’s massive Plan for Transformation. Rosenwald includes 60 public housing apartments for seniors, replacing public housing torn down elsewhere.

In exchange, the CHA gave Rosenwald Court $17.4 million of its precious capital funds. The 60 new public housing apartments will receive a subsidy from CHA to cover operating expenses – though the federal government has a long history of underfunding public housing.

The Rosenwald also includes another 60 apartments for seniors who receive federal project-based Sec. 8 rental subsidies.

Surprises of historic rehabilitation
Once construction began, workers found a terrible surprise.

Over the decade when Rosenwald Court stood empty, rainwater had come in through the rooftops to damage support columns and work its way underneath the floors.

“The structural conditions of the building were much worse than we thought,” says Pace.

Also, many support columns weren’t in the places marked on the architectural drawings from the 1920s. The developers needed to quickly redraw the floorplans for many apartments.

They also had to switch the windows they had picked out, to meet the standards of historic rehabilitation officials.

The change order added another $100 in cost per window for about 2,500 windows.

The changes added roughly $12 million to the price tag for Rosenwald Court.

All the partners involved in the project were too deeply committed to turn back. The City of Chicago found another $3.5 million left over from its federal Neighborhood Stabilization Program funds. The extra costs will also generate more eligible basis for the property’s four percent LIHTCs and Historic Tax Credits.

The developers arranged another closing, to arrange additional tax-exempt bond financing and four percent LIHTCs, to use that extra eligible basis.

Finally, the general contractor agreed to take a $4.5 million note, instead of immediate payment. The I.O.U will mostly be paid back by the time the project closes its permanent finance later in 2017.

The first residents moved in August 2016, as work finished. By February 2017 all of the apartments were occupied. The retail space will be finished in July 2017.

Tenants have already signed up for the storefronts, including a coffee shop and a grocery store. There’s also a technology company employing dozens of well-paid programmers and a shop selling homemade ice cream and sandwiches.

Sources and Uses
$61 million, equity from nine percent Low Income Housing Tax Credits and Federal Historic Rehabilitation Tax Credits
$25 million, City of Chicago tax increment financing
$17.4 million, Chicago Housing Authority capital funds
$8.5 million, Neighborhood Stabilization Program, City of Chicago
$7.8 million, seller financing, the Burton Foundation
$6.5 million, deferred development fee
$3 million, Illinois Donation Tax Credit
$2.5 million, tax-exempt bond loan, BankORION
$1 million, general contractor loan
$785,153, energy grant, Illinois Department of Commerce & Economic Opportunity
$700,000, Federal Home Loan Bank, Affordable Housing Program
$134.1 million, total development costs