Oak Grove Capital Originates $59.5M in Fannie Funding for Affordable Housing in Chicago
- Aug 17, 2011
August 16, 2011
By Barbra Murray, Contributing Editor
While the lending community is warming up to real estate industry borrowers, financing for low-income housing remains difficult to secure — and Oak Grove Capital knows just how difficult. Recently, the affordable-housing real estate financial services provider skillfully originated a $59.5 million Immediate Funding Fannie Mae NIBP Bond Credit Enhancement loan for The Related Cos.’ acquisition and rehabilitation of the 694-unit Parkway Gardens on Chicago’s Southside, and it was no simple feat.
Despite the challenges, Oak Grove found Related’s project a worthy endeavor. “Chicago is one of the highest-cost markets in America and the demand for quality affordable housing is very strong,” Tim Leonhard, managing director of affordable housing, at Oak Grove, told Commercial Property Executive. “This property now has a several-thousand person waiting list. There’s extraordinary pent-up demand, you could even say infinite demand.”
Parkway Gardens, which opened its doors as a co-op in the mid-1950s before being transformed into an affordable-housing property in the mid-1970s through the HUD Section 236 IRP program, had been on the verge of extinction. The Section 8 agreement on the property — consisting of 11 mid-rise structures and 24 garden-style structures, some of which hadn’t seen an upgrade since their development over 50 years ago — was scheduled to expire before Related came into the picture.
But the real estate company required a big helping hand and Oak Grove stepped up to the plate, diligently working for approximately 10 months to orchestrate the multi-faceted financing package.
The Illinois Housing Development Authority is the agency that provided the $59.5 million in bonds under Fannie Mae’s NIBP for the restoration of Parkway Gardens at the hands of Related, which was able to acquire the property with the assistance of a $36.5 million equity investment from Wells Fargo & Co. The financing package also included various local construction incentives as well as the unusual combination of low income housing tax credits and federal historic tax credits.
The financing ultimately involved the participation of 12 financial entities and regulatory agencies.
“The coordination of up to a dozen different finance participants takes a certain amount of expertise to pull off,” Leonhard said. “Obviously, we were blessed to work with an experienced client. Fannie Mae was exceptional, HUD was exceptional. We had a lot of stakeholders all working toward a common goal, which is always fun, and that’s not always the case. Everyone wanted to see the affordable housing preserved, from the alderman all the way up to the secretary of HUD. It’s nice when you have all of the momentum on your side, but it was still a really tough undertaking.”
The rehabilitation of Parkway Gardens is on track to reach completion in 18 months.