Related Makes Midwest Plays
- Apr 30, 2015
Months after making news in Chicago for selling its new luxury apartment tower OneEleven for a record $328.2 million, Related Cos. is going back to its roots and acquiring 17 properties with more than 3,000 affordable housing units across the Midwest, many of them in Chicago.
The portfolio is being acquired from Metroplex Inc., a Chicago-based affordable property management company, by two Related divisions: Related Affordable and Related Midwest. Related is also buying Metroplex, which manages 36 multi-family developments consisting of 4,749 units in Illinois, Iowa, Minnesota and Florida. Metroplex has 200 employees.
The Wall Street Journal reported the deal is worth nearly $270 million.
“While Related is perhaps most widely known for its luxury residential developments, our company was founded more than four decades ago with the goal of developing new and retaining existing affordable housing. Today’s announcement demonstrates our pledge to expand housing options across all income levels,” Curt Bailey, president of Related Midwest, said in a news release.
Through a public-private partnership with the city of Chicago and Illinois Housing Development Authority, Related said the apartments will remain affordable for 30 years and more than $262 million will be invested in renovations. Related will lead the effort to update the seven properties in Chicago as well as 605 units elsewhere in Illinois, 404 units in Florida, 248 units in Iowa and 280 units in Minnesota.
More than 1,500 of the portfolio’s assets are in Chicago, including the 628-unit Marshall Field Garden Apartments in the Old Town neighborhood. Built in 1929 by philanthropist and department store heir Marshall Field III, the development comprises 10 five-story buildings in a two-block area. It was due to lose its affordable designation in 2017, but that will be extended by 30 years because of the Related acquisition. Extensive renovations, expected to cost $175 million, will begin in July.
The rehabilitation project is being financed by the IHDA and includes low-income and historic preservation tax credits. The property received $102 million in conduit bond financing from IHDA, which also allocated the Low-Income Housing Tax Credits that were purchased by Wells Fargo. Fannie Mae provided credit enhancements for the bonds via Wells Fargo as DUS lender, according to the release.
JLL Managing Director Christine Espenshade, who was not involved in the deal, said it’s great when qualified owners acquire existing affordable housing with the intent to upgrade and preserve it for future generations.
“The affordable housing stock is dwindling, especially in areas with a high cost of living, and this purchase will ensure high-quality housing remains available,” she told Commercial Property Executive.
Known more recently for its luxury apartment buildings like OneEleven in Chicago and mixed-use developments like its planned $20 billion Hudson Yards project on Manhattan’s Far West Side, the company founded in the 1970s has done its fair share of affordable housing.
“Related has preserved more than 35,000 affordable housing units, and we have never converted a single unit to market rate,” Matthew Finkle, president of Related Affordable, said in the release. “Through public-private partnerships like this, we will be able to significantly improve the lives of the residents who call these communities home, and ensure that thousands of residences in the city of Chicago and the Midwest will remain accessible to the families and individuals who need them most.”
In addition to the Metroplex portfolio, Related has acquired 3,196 affordable units and expects to close on an additional 1,022 units this year. Nearly four years ago, Related Affordable acquired Parkway Gardens, a 694-unit affordable housing property on Chicago’s Southside. Its affordable status was also extended 30 years when Related Affordable made the acquisition with a $36.5 million equity investment from Wells Fargo. Related, IHDA, Fannie Mae and lenders including Oak Grove Capital worked together to get funding for $100 million in renovations.