A Los Angeles-based affordable housing investor that has been buying properties in and around Chicago extended its spending spree and dipped into the senior housing asset class with its biggest purchase in the area yet.
Jeff Jaeger and Scott Alter’s Standard Communities paid $110 million for Commonwealth Apartments in Lincoln Park in the city and Greenleaf Apartments in southwest suburban Bolingbrook, and is putting another $50 million into upgrading the properties Crain’s reported.
With fees, reserves, the renovation costs and other costs included, the deal adds up to $192 million Standard will spend on the properties, which are rented to tenants aged 62 and older using Section 8 housing vouchers.
The sellers were ventures led by local landlord David Katz.
The purchase is part of Standard’s broader strategy to preserve subsidized multifamily properties that are at risk of losing their affordable status — specifically in wealthier and more gentrified neighborhoods where affordable housing is hard to come by.
Commonwealth is a 145-unit building located at 2757 North Pine Grove Avenue in Lincoln Park and Greenleaf, located at 503 Kildeer Drive in Bolingbrook, has 321 units, meaning the deal comes out to about $236,000 per unit.
The main risk posed to these subsidized affordable housing complexes is expirations of contracts with federal and state housing authorities that subsidize rents paid by tenants. When they lapse without new investment vehicles that provide additional subsidy and requirements to keep them affordable, new investors can buy the properties and convert them to market-rate rentals.
In addition, property owners often overlook costly repairs and upgrades, lessening the quality of life for residents and leading to overhauls becoming necessary every 20 to 30 years, such as those Standard is proposing at the two properties.
Standard is financing the purchases and renovations with about $100 million in tax-exempt bonds issued by the Illinois Housing Development Authority and low-income housing tax credits sold to PNC Bank.
The firm aims to increase its portfolio of more than 18,600 apartments across the country to 50,000 by 2030. In the Chicago area, Standard owns more than 2,300 residential units, including the 148-unit Lake Park Crescent Apartments on the South Side and the 371-unit Bryn Mawr Belle Shore Apartments in Edgewater, which it bought for $46 million last month.
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