Lincoln Yards Revamp Ramps Up as JP Morgan Balks

Jim Letchinger’s plan to rescue the failed $6 billion Lincoln Yards development now comes with a catch.

His firm JDL and equity partner, Los Angeles-based Kayne Anderson, announced this morning that they’re moving forward with purchasing the site’s 31-acre northern parcel on the western edge of Lincoln Park along the Chicago River’s North Branch.

While the official announcement didn’t reveal the scope of the new development team’s plans, people familiar with the move said they’re eyeing the construction of about 1,000 housing units. The residential component would be mostly rentals with some for-sale units. The plan also calls for about 60,000 square feet of retail, riverwalk improvements and a large public plaza.

The seller is Bank OZK, which seized control of the land earlier this year from a joint venture of Dallas-based Lone Star Funds and Chicago-based Sterling Bay, which struggled to meet commitments to the city that would have allowed its vision of 14.5 million-square-foot of buildings on Lincoln Yards to take shape. The price of the 31-acre parcel that Chicago-based JDL and Kanye Anderson are set to acquire is said to be around $80 million, well below the $125 million debt that Bank OZK was owed by Sterling Bay and Lone Star at the time of their loan default on the 31-acre site.

“I am pleased to see progress on the site with JDL and Kayne Anderson,” 32nd Ward Alderman Scott Waguespack said in a statement. “We will be working closely with the surrounding communities and city officials to revitalize the area with new housing and development that will help grow our local economy.”

JDL and Kayne previously negotiated with Sterling Bay’s other equity partner, JP Morgan Asset Management, on the 22-acre parcel on the other side of the river at the northern edge of Bucktown but have encountered hiccups, people familiar with the situation said. Even though JP Morgan Asset Management hired JLL to market the property to facilitate an exit amid frustration over the lack of development progress, the bank’s investment arm feels it’s in a bind and cannot complete a sale as its partner Sterling Bay fumes over Kayne Anderson’s involvement in Letchinger’s rescue attempt.

Kayne previously contemplated infusing cash into the project to aid Sterling Bay’s original vision after it became clear the project was in trouble. But Sterling Bay and Kayne couldn’t come to terms on an agreement. And Sterling Bay’s attempts to kickstart over $490 million in infrastructure work it agreed to with the city in 2019 continued to flounder.

Letchinger and JP Morgan declined to comment on the status of their negotiations to buy the southern portion of Lincoln Yards — which was rumored to be on the block at a price of around $80 million, a staggering discount from what Sterling Bay and JP Morgan paid to acquire the land and prepare it for development. A Sterling Bay spokesperson didn’t immediately provide comment when reached late Wednesday.

With Sterling Bay out of the picture on the northern parcel, however, the city has agreed to untether the area’s development from that 2019 agreement, allowing Letchinger and Kayne to move forward without needing to build as much expensive infrastructure. Sterling Bay’s plan was focused heavily on office space, meaning there would have been a lot more commuters in and out of the site and thus require the extension of roads and construction of bridges to facilitate access.

It’s unclear what Sterling Bay and JP Morgan hope to accomplish by remaining in control of the southern portion of Lincoln Yards at this point. If Sterling Bay is able to buy out JP Morgan’s interest in the property at a price similar to what JDL and Kayne plan to pay – and the city is willing to bend its infrastructure requirements for some of the southern site, too – it could regroup with a new development plan.

People familiar with JDL and Kayne’s intentions said the joint venture would still be interested in considering a purchase of the southern part of Lincoln Yards from Sterling Bay and JP Morgan.

Furthermore, the new development team is re-branding the northern parcel to remove the Lincoln Yards moniker, and is instead calling it Foundry Park. That’s in homage to the property’s long history as the A. Finkl & Sons steel mill, which Sterling Bay and Lone Star paid $140 million for in 2016, far more than JDL and Kayne are paying to buy that 22-acre site plus an additional nine acres on the northern side of the development site.

Foundry Park also plans to include a greater proportion of affordable housing units than had been required on the site, the development team said. Sterling Bay’s plan included 600 affordable units, or 10 percent of the total it planned to build on the site, in addition to making nearly $40 million in payments to the city’s affordable housing fund.

“We see incredible potential to establish this site as a place that thousands of Chicago residents can call home and create a shared space that brings together members of the Bucktown, Wicker Park and Lincoln Park communities for years to come,” Letchinger said in a statement. JDL and Kayne are expected to close on the northern Foundry Park parcel in the third quarter.