The effective shuttering of Heartland Housing, Heartland Alliance’s affordable housing unit, will slow down, but not stop, the redevelopment of the historic Laramie State Bank property, 5200 W. Chicago Ave., said Athena Williams, executive director of the Oak Park Regional Housing Center, a lead partner on the INVEST South/West project.
In 2021, the Austin United development team spearheaded by Williams’ organization and Heartland Alliance, a long-time Chicago immigrant assistance and anti-poverty organization, was picked as the winning bidder for the redevelopment of the Laramie State Bank in Austin under the city’s INVEST South/West Program. That development broke ground in November with $47.7 million in city funds pledged to the conversion. But Heartland Housing ran into financial trouble during the pandemic, and in late May, the Cook County Circuit Court appointed Habitat Company as a receiver, taking over management of its affordable housing buildings.
Williams told this newspaper that the Austin United development team is currently working to choose another real estate development firm, and they expect to make a final selection by June 24. The Housing Center still hopes to begin construction this fall, and they expect it to finish up within another 18 months.
Austin United plans to turn the historic bank building into office space, retail and a bank branch, and build a brand-new 78-unit, six-story apartment building with a public plaza on vacant land west of the bank. Williams said that they will build the housing first and begin renovating the bank building around 3 to 4 months later.
On May 11, the city of Chicago filed a motion in Cook County Circuit Court to appoint a receiver for Heartland Housing’s 14 affordable housing properties across the city, and a judge granted the motion four days later. That effectively took day-to-day control of those buildings from Heartland Housing and turned it over to The Habitat Company, a prominent Chicago real estate firm that manages a wide range of properties, from public housing to high-rent luxury buildings.
A receiver is a court-appointed officer that acts as a neutral party to manage assets or properties when they are not being properly maintained or fall into legal or financial trouble. In its motion asking the court to appoint a receiver for the Heartland buildings, the city cited unpaid utility and trash bills, building code violations and the expected loss of its property insurance.
The lapse in insurance coverage could potentially impact low-income tenants by putting government subsidies at risk, the city stated in court filings. Those subsidies help keep rents affordable for the tenants in more than 800 units in those buildings.
“Heartland Housing is no longer able to manage its Chicago properties … as of May 31, 2023,” the city’s motion said.
Heartland Housing’s properties included Mae Suites, 148 N. Mayfield Ave. in Austin, and two North Lawndale apartment buildings at 1235 S. Sawyer Ave. and 1251 S. Sawyer Ave.
In a written statement, Ed Stellon, Heartland Alliance’s chief external affairs officer, stated that economic conditions coming out of the pandemic made it difficult for the agency to sustain the properties.
“During the pandemic, federal mandates limited our ability to pursue rent collection and at the same time, rising inflation dramatically escalated our operating costs,” he stated. “We’ve also experienced the same staffing crisis as everyone else. In the end, despite our best efforts, these challenges proved too much for Heartland Housing to overcome financially.”
Heartland Alliance’s plan to sell Heartland Housing didn’t pan out, leading to its properties being placed in receivership, Stellon said.
Williams said she wasn’t aware of Heartland’s issues until January, shortly after Austin United got a building permit for the Laramie Bank project. Austin United was doing some due diligence, and city officials started to express concerns about Heartland Housing’s financial status and its impact on the Laramie Bank project, according to emails obtained by Block Club Chicago.
In an email to a city Department of Housing official, Earl Chase, executive director of Heartland Housing, disclosed that his agency was parting ways with Heartland Alliance, the organization’s sole financial backer. Heartland Housing was in the process of being purchased by another “not-for-profit affordable housing provider,” Chase wrote.
“Subject to all required consents from lenders, partners, and other parties, closing is projected to take place later this year,” he added.
Chase’s message was shared with other top city officials, including Maurice Cox, commissioner of the Department of Planning and Development, and Samir Mayekar, then a deputy mayor overseeing economic development. A city lawyer said that Heartland’s shaky status could threaten the financing for the bank project.
“The entire deal’s credit underwriting is directly implicated with this news,” said Adam Walker, assistant corporation counsel for the city.
In a statement, officials with the city’s Department of Planning and Development said a changed partnership structure for the Laramie Bank project is under review “with Heartland Housing being replaced by an experienced residential developer.”
“Partnership details are expected to be finalized for a City Council introduction this summer,” officials said.
Ald. Emma Mitts (37th), whose ward includes the Laramie Bank site and who has been supportive of Austin United’s plans, said she still has confidence in the project.
“I am a firm believer in working with our city and community partners to assist people and build pathways that ensure every Chicagoan has affordable housing information, convenient retail resources, and diverse business opportunities to help them generate economic sustainability and generational wealth for the future,” she said.
Williams described the situation as a small stumbling block.
“We are moving forward. Nothing is stopping this train,” she said, adding that they had to “pause it for a while” as Heartland tried to sell its housing unit and went through the court process.
Williams said that, once the new real estate developer is selected, it shouldn’t take long for the process to restart again.
“They’d just to have to go through underwriting with the city and the lenders, and they’d have to go through 2 to 6 weeks,” she said. “I’m a believer that when there’s a will, there’s a way. The city has been very supportive. I’m now looking at the new partner and I’m hoping for continued support in the community and support from the funders.”