Evergreen Real Estate Group recently took on the preservation of six affordable housing developments in Chicago’s South Shore neighborhood.
The 278-unit portfolio, which was acquired about five years ago, includes a mix of buildings, ranging from a century-old former hotel that’s home to seniors to walk-up buildings for families that were built in the 1980s. The buildings were previously owned by four different partnerships with one common sponsor.
The portfolio involved buildings with different construction and unit types, building systems from different eras, and five different Housing Assistance Payment (HAP) contracts, according to Kevin Beard, director of acquisitions and preservation at Evergreen.
Despite their differences, the properties shared some of the same risks.
“There’s a pretty well -documented concern about gentrification in South Shore,” Beard says. “It’s a nice neighborhood. It’s a lakefront neighborhood. There’s the South Shore Cultural Center, and the Obama Library is being constructed not too far from here.”
That’s all led to worries that longtime residents will be displaced as new investors arrive, making the preservation of affordable housing even more important. But, perhaps, the larger issue for the South Shore portfolio was the sustainability of the aging buildings and the need for rehabilitation.
Evergreen recently completed renovating several of the properties and is putting the finishing touches on the last few while also extending the HAP contracts on the developments to make sure they remain affordable for another 20 years.
The extensive rehab included unit upgrades, new building systems, and major facade work. The construction cost was approximately $33.5 million.
The Chicago-based firm structured the project as two transactions. One building is designated for seniors, and the rest are for families, so the financing had to be separated for the Department of Housing and Urban Development-insured Section 221(d)(4) loans.
Both transactions used low-income housing tax credits and tax-exempt bonds from the Illinois Housing Development Authority (IHDA). PNC Real Estate provided the housing credit equity, and KeyBank Community Development Lending and Investment originated the loans. In addition, Clocktower Tax Credits provided equity from the Illinois Affordable Housing Tax Credit, also allocated by IHDA.
Evergreen also partnered with nonprofit Housing and Human Development Corp., which serves as an owner and service provider for the properties.
Despite the complexities of working with multiple properties with different needs, the team was able to set up a financing structure that achieved efficiencies of scale by combining them together, according to Beard.
“Affordability was preserved, and the buildings were also preserved,” he says.