September 2013 cic Community Investment Corporation Chicagoland s Leading Multifamily Rehab Lender DEVELOPMENTS Recipient of the 2012 MacArthur Award for Creative and Effective Institutions 10-year loan speeds process, lowers rate CIC is always on the lookout for gaps in the multifamily financing marketplace. So, it is no surprise that there has been brisk initial demand for a new CIC loan product for buildings which need little or no rehab. This new loan is much like our traditional three-year adjustable rate mortgage but with a shorter 10-year term and 25-year amortization. Loan to value should be no more than 75%. The initial rate is currently priced at 4.5% but will change with the market. In addition, processing time for the loans can be streamlined because of the reduced rehab component. A modest prepayment penalty will apply during the initial three years. Why did we refinance three of our properties with the new 10-year program? That s easy: We re saving a lot of money! said Demetrios Christakos, vice president of JJL Management. As an existing CIC customer, we know the staff is easy to work with. The process was no hassle at all, and the rate we were quoted was lower than what we had been paying. We re very happy with CIC. Although this new loan product is targeted at buildings that need little or no rehab, CIC will also continue to offer standard acquisition/rehab loans for buildings that need more extensive renovation. For an application or more information on all CIC loan products, contact a CIC loan officer at 312.258.0070. Coming soon: New loans for 1-4 unit buildings The Preservation Compact has found that 38% of the rental stock in Chicago is in small buildings, which have been particularly hard hit by foreclosures. But most of the foreclosures are located in areas with very limited homebuyer demand, and financing for investor-owned small buildings is almost nonexistent. CIC is responding to this market need with a new Targeted Impact Loan program. Under the new program, investor owners who acquire and rehab collections of 1-4 unit rental buildings located close to each other can obtain a Targeted Impact Loan as a take-out. CIC will administer a $22 million loan pool mostly from private banks. The pool is leveraged by a $2 million grant from the Illinois Attorney General s office and a $5 million program-related investment from the MacArthur Foundation. We expect to take applications later in the fourth quarter of 2013, said CIC President Jack Markowski. 222 South Riverside Plaza, Suite 2200 Chicago, IL 60606-6109 www.cicchicago.com
Preserving rental housing in the new economy More than 250 building owners and others gathered at the Rental Housing in the New Economy conference July 18 on the University of Illinois at Chicago campus to discuss and plan for how to best protect Cook County s affordable rental housing stock. Rebounding from the crash, the real estate market is in the midst of another big change, with deep implications for affordable rental housing, for quality of life in our neighborhoods, and for the economic and competitive future of the city and region. That big picture was the frame for Rental Housing in the New Economy, a daylong conference sponsored by The Preservation Compact. The event brought together government officials, housing advocates, community developers, academics, and building owners to discuss key issues and strategies for affordable rental housing in Cook County in the current market. In his keynote address for the conference, University of Toronto professor Richard Florida, author of The Rise of the Creative Class, made a similar point. In what he characterized as the biggest economic transformation of all time, cities are an essential platform for the knowledge economy, and rental housing is an important ingredient. He even cited 45% as a specific target percentage of renters that a city needs for a healthy knowledge economy. Rental housing is going to be an increasingly important part of our social bargain, he said. Preservation of affordable stock Jack Markowski, the president of Community Investment Corporation and the chair of The Preservation Compact, made the statistical case demonstrating the mismatch between affordable housing supply and demand. Preservation Compact Director Stacie Young and Dan Burke of HUD Richard Florida, University of Toronto professor More than half of renter households in the Chicago area are rent-burdened, meaning they pay more than 30% of their income in rent. For households making less than $30,000 annually, that figure shoots up to 89%. As Markowski noted, that income level includes working families headed by nursing assistants, janitors, private school teachers, office clerks and others on whom society depends. The gap between the supply of available affordable rental units in Cook County stood at 165,000 in 2005 and is expected to rise to 224,000 by 2020. When many people hear affordable housing, they think of governmentsubsidized units such as public housing or Section 8. However, the vast majority of affordable units in Cook County are market-rate and paid for with no subsidies at all; nationwide, the figure is 75%. To ensure that Chicago s crucial stock of affordable private rentals is protected, existing units must be preserved and rehabbed. Building new rental housing can cost more than $300,000 per unit, as compared to about $40,000 per unit that many investors pay to rehab an existing building. With affordable rents at about $1,000 a month, there is no way in the world that the private market will produce new affordable rental housing, Markowski pointed out. 2 CIC DEVELOPMENTS
Life in a changing economy In the panel, Financing Multifamily Rental Housing, participants discussed the post-crash realities of finding credit for purchase, rehab and operation of smaller buildings with fewer than 100 units. Before 2008, this segment of the real estate market had been served largely by locally based portfolio lenders. Banks dropped out of this market in dramatic fashion [when the real estate bubble burst], said panelist Barry Zigas, a member of the Bipartisan Policy Center s Housing Commission and the director of housing policy for the Consumer Federation of America. Nonprofit lenders like CIC have worked to fill the gap, but the market remains underserved, with serious consequences for low-income communities and their affordable housing stock. Multifamily Finance Panel (from left) Geoff Smith, DePaul University; Pamela Daniels- Halisi, The Private Bank; and Mark Willis, Furman Center of New York University Building a better market: What it takes In her remarks to start the day, Cook County Board President Toni Preckwinkle talked about the importance of affordable rental housing and several programs that her office has pursued to protect it, including a $30 million Cook County Board President Toni Preckwinkle loan fund and the Cook County Land Bank, which opened earlier this year. We want to look for areas where we can reinvest, where for a variety of reasons reinvestment is difficult, Preckwinkle said of the Land Bank, so the Land Bank authority will work with Chicago and the 130 cities, towns and villages in Cook County to pursue local goals. The Land Bank was discussed in greater detail at one of four breakout sessions, Recovering Lost Rentals in 1-4 Unit Properties. The breakout sessions identified tools that can be used to address the hurdles in preserving affordable rental in today s changing market. With a new era of rental housing dawning, conference attendees rededicated themselves to the work of ensuring that affordable options remain for those at the lower end of the income ladder. Materials, presentations, photos, and video of the conference are available at www.preservationcompact.org/conference. Barry Zigas, Bipartisan Policy Center s Housing Commission Jim Wheaton, CIC Energy Savers manager Thurman Tony Smith, PNC Bank CIC DEVELOPMENTS 3
cic profile: TED BRZYSKI Finding my niche by providing housing through cic How did you get into this business and come to work at cic? I am the product of an activist generation committed to social justice and improving the common good. I was born and raised in Chicago and loved its many different neighborhoods. Following a seminary education, I became an urban planner, learning the regional context and spending time in many different suburban environments. After working as a community organizer, I found my long-term niche providing housing through CIC and visited all the other neighborhoods I missed in my youth. Along the way, I also managed apartments and worked for a national housing corporation. Ted Brzyski Senior Loan Officer What s your favorite part of working at cic? In my 20-plus years at CIC I have enjoyed helping many first-time and aspiring owner/operators determine the economic feasibility of various properties. I get a real feeling of accomplishment helping a property go from a nonproductive shell to a rehabbed, functioning property that benefits the tenants, the owner and the neighborhood. And at CIC we do this whether economic times are good or bad. What changes do you see on the horizon for this business? To meet changes in the marketplace, I think CIC will have to broaden its investor base beyond banks to bring in investors who share our mission and business model. Some of this patient capital may be provided by foundations, institutions, pension funds and philanthropists. I think a different form of long-term private/public ownership needs to be promoted more aggressively to protect neighborhoods from the volatility and churning of the marketplace. Land and location are still the most important components of stable real estate and neighborhoods. Community land trusts own the land and protect long-term affordability and neighborhood quality while their partnering owner/operators make the improvements, provide quality management and profit from the cash flow. There is at least one such community land trust already in existence in the Chicago metro area, and two suburban public/private corporations using market savvy for community benefit. I get a real feeling of accomplishment helping a property go from a nonproductive shell to a rehabbed, functioning property that benefits the tenants, the owner and the neighborhood. What is something interesting about you that most people don t know? Every night I go out and look for the stars and moon which remind me of my connection to the universe and the transcendent. It helps put everything in perspective. CIC DEVELOPMENTS 4
Deteriorated buildings? We re on it! In a time of increasing need and decreasing resources in many communities, we need to develop new approaches to provide funding to repair deteriorated buildings and provide long-term affordable rental housing. On page one of this newsletter, we describe two such efforts. The 40 investors in the CIC loan pool have agreed to reduce the interest rate on loans for buildings that require little or no rehab, making it more feasible to invest in our neighborhoods. And seven other investors, along with the MacArthur Foundation and Illinois Attorney General Lisa Madigan, have committed $26 million to finance investors who rehab 1- to 4-unit buildings in target areas and operate them as rental housing. CIC is pleased to be working with the City of Chicago on another innovative program: the TIF Rehab Program for Vacant Multifamily Buildings. Growing out of discussions between the City of Chicago Department of Housing and Economic Development (DHED) and the Chicago Coalition for the Homeless, this program will provide up to 50% of the cost of rehabbing a vacant or foreclosed multifamily building if 50% of the units are affordable for, and rented to, low-income households. Recently CIC approved the first building under this program, a 26-unit building at 1860-66 S. Komensky in the North Lawndale community. The Ogden-Pulaski Tax Increment Financing (TIF) District will provide $735,000 toward the rehab of the property which, at about $28,000 per unit, is a relatively modest investment from the City. The building is being rehabbed by Pangea, a very capable Chicago developer, who will set aside 13 of the rehabbed units for lowincome households. 1860-66 S. Komensky building in North Lawndale We believe that this effective and efficient program can be replicated in TIF districts across Chicago. In the City s new five-year housing plan, DHED expresses an intention to expand the TIF Rehab Program for Vacant Multifamily Buildings. With such an expansion, it will be possible to tap new local funds to efficiently rehab housing, rebuild communities, and provide long-term affordable rental housing. CIC salutes the City and the Coalition for the Homeless for coming up with such a creative program, and we look forward to using it on multifamily buildings in TIF districts throughout the city. Jack Markowski CIC President CIC DEVELOPMENTS 5
cic Corporation 222 South Riverside Plaza, Suite 2200 Chicago, IL 60606-6109 Community Investment 312.258.0070 www.cicchicago.com Non-Profit Org. U.S. Postage PAID Chicago, IL Permit No. 8493 What s Inside New cic loan programs page 1 Preserving rental housing in the new economy page 2 cic profile of Ted Brzyski page 4 cic President Jack Markowski on deteriorated buildings page 5 Contact cic for all your multifamily housing needs! MORTGAGES FOR ACQUISITION AND REHAB ENERGY SAVER LOANS BUILDINGS FOR SALE 312.258.0070 www.cicchicago.com cic energy savers program FREE energy audit Low-cost energy loans at 3%* Save up to 40% on energy costs Call a cic Loan Officer for details. *subject to change Experts gathered at the Rental Housing in the New Economy conference to discuss and plan for how to best protect Cook County s affordable rental housing stock. See more on page 2.