Neighborhood Housing Services of Chicago is cashing out of its apartment ownership business.
Villa Capital Partners acquired 14 apartment buildings on the city’s West and South sides from the nonprofit in a $7.8 million deal that requires the buyer to keep all 289 units affordable for at least seven years.
Villa backed its purchase with a $6 million acquisition loan from Oak Brook-based Leaders Bank.
10509 South Michigan Avenue
The buildings range in size from a 55-unit courtyard building in Austin to a three-flat in North Lawndale, spanning the city’s West Side from Washtenaw to Central avenues. A 40-unit row of townhomes at 10509 South Michigan Avenue in Roseland was the sole South Side property to change hands in the sale.
Neighborhood Housing Services bought all the properties during the 1990s and built or renovated them with help from a patchwork of federal and local affordable housing tax credits. But as debts mounted over the decades, the buildings faced potential foreclosure before Villa Capital offered to pick them up in a privately-funded purchase, Villa principal Erik Hubbard said.
The City Council last year forgave a series of loans the city had extended to NHS, and the nonprofit paid a $2.1 million settlement to the city in return. The agreement also stipulated Villa would buy the units, spend $3 million on building upgrades and keep the apartments affordable to renters who earn roughly half the city’s area median income.
The sale comes on the heels of a new report from DePaul University’s Institute of Housing Studies showing a dwindling supply of affordable apartments all over the city, especially on the West Side. The number of affordable units in the Humboldt Park/Garfield Park submarket dropped by 5.3 percent between 2012 and 2017, and the number fell by 6.2 percent in Austin and Belmont Cragin during the same period, according to the report.
David Goss of Interra Realty, which brokered the sale, said Villa’s takeover of the properties could help stem some of the forces squeezing low-income renters on the South and West Sides. Villa had already been managing the properties since 2015.
“There’s not necessarily a lack of affordable housing in these neighborhoods, so much as there is a lack of quality affordable housing,” Goss said. “So for a respected operator like Villa to come in with a commitment to put money into the properties, to keep them clean and safe all while keeping them affordable, it’s a win-win for everybody.”
Hubbard and co-founder John Pagone launched Villa Capital in 2006. The Pilsen-based firm owned or managed more than 2,500 units around the city as recently as 2014, but sold them all starting the following year.
In the 14-building crop of NHS-owned apartments, Villa “saw an opportunity to find a core asset that allows us to get back into the game and develop a portfolio,” Hubbard said.
Villa plans to raise rents over time, but won’t charge beyond sliding-scale income caps set by the city based each unit’s size and location.
“Our investment thesis is that, over the long term, there is a continued need for affordable housing in Chicago,” Hubbard said. “So there will continue to be a supply-demand balance that works for us.”
By shedding its multifamily properties, NHS pivots back to its main suite of education, lending and consulting programs for homebuyers.